The United States Supreme Court's decision in American Needle, Inc. v National Football League, preserves the status quo and denies the NFL an early victory in the upcoming labor battle with the National Football League Players Association.
The NFL's position in American Needle was the legal version of a Hail Mary pass. Like any trick play, if successful, the NFL would have gained a substantial and perhaps insurmountable lead over the NFLPA in labor negotiations. But, the Supreme Court played Dion Sanders, knocked down the pass, and required the NFL to play the collective bargaining game the old-fashioned way - in good faith and one issue at a time.
On one hand, American Needle has nothing to do with collective bargaining or labor relations. The decision means that the 32 teams of the NFL are not a "single entity" for purposes of determining whether the collective licensing of all teams' logos through NFL Properties can be "a contract, agreement, ... or conspiracy, in restraint of trade" in violation of Section 1 of the Sherman Act. This limited ruling means that things have not changed and the NFL remains subject to our Nation's antitrust laws. On the other hand, American Needle has everything to do with collective bargaining and labor relations.
As I discussed in a previous post regarding the possibility of a lockout in the NFL, the risk of antitrust liability is potentially a powerful tool for the NFLPA to use against the NFL. Had the Supreme Court agreed with the NFL, American Needle would have substantially altered the NFL's antitrust risks and shifted the balance of power in collective bargaining and labor relations in favor of the NFL.
American Needle is a significant loss for the NFL. The NFL cannot ignore the potential risks of antitrust liability in labor relations. The Court's unanimous rejection of its position means the NFL's legal theory was without merit and that we are unlikely to see similar arguments from the NFL in the future.
In reaching its decision, the Court made observations that may prove to be more significant than its ultimate ruling. In this regard, both the NFLPA and the NFL would do well to pay particular attention to certain elements of the Court's analysis. Regarding future antitrust challenges in labor relations, the NFLPA should note the following from the Court's opinion:
The fact that the NFL teams share an interest in making the entire league successful and profitable, and that they must cooperate to produce games, provides a sensible justification for making a host of collective decisions. Because some of these restraints on competition are necessary to produce the NFL's product, the Rule of Reason generally should apply, and teams' cooperation is likely to be permissible.
Other features of the NFL may also save agreements amongst teams. We have recognized, for example, 'that the interest in maintaining a competitive balance' among 'athletic teams is legitimate and important.'
These comments, referred to as dicta, are not essential to the holding in American Needle. Yet, they provide guidance on how the Supreme Court may rule if collective bargaining in the NFL deteriorates into antitrust lawsuits challenging the draft, salary restraints, and other features of a system that the NFL may unilaterally impose if collective bargaining with the NFLPA reaches impasse.
The Court's decision may also upset the revenue sharing model that has come under fire internally in the NFL. Pooled assets and agreements among the NFL teams on how to sell those assets fund certain revenue streams that are shared among all NFL teams. One of the more interesting issues created by the Court's decision is whether the NFL must change the way it licenses teams' logos. Jerry Jones, the owner of the Dallas Cowboys, may have just won the right to license the Cowboys logo nationwide, without sharing any of his licensing revenue with other team owners. Owners of profitable and popular teams have been looking for ways to make more money and keep their independently generated revenues out of the NFL's various revenue sharing pools. The NFL's Hail Mary in American Needle may have more impact in the boardroom than in the locker room.
Finally, NFL licensees who are currently required to "buy" the logos of all 32 NFL teams in exchange for the right to use the logos of the more popular teams, such as the Cowboys, will look closely at the impact of the Court's decision in American Needle. These types of bundling arrangements, called "tying," also violate the antitrust laws.
It is rare that a Supreme Court decision is considered a "landmark" decision when it does little more than preserve the status quo, but today's decision may have its greatest impact because it did not alter the playing field between the NFL and the NFLPA.