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American Needle v. NFL and the future of professional sports as we know it, the verdict

Money, money, money, must be funny, in a rich man's world
Money, money, money, must be funny, in a rich man's world

Yesterday the Supreme Court announced it's verdict in the case of American Needle vs the NFL. Niners Nation had a front page post on this awhile back when the case first went to oral arguments. American Needle vs the NFL and the future of professional sports.

Here's a quick summary of the case.

The NFL created NFL Properties to develop and market the NFL brand. Part of that job is to sell merchandise--hats, jerseys, t-shirts, etc. American Needle was one of those companies that made apparel for the NFL. In 2000 the NFL signed an exclusive agreement with Reebok to make all NFL apparel. As you can imagine this didn't go over well and American Needle took the NFL to court, claiming a violation of the Sherman anti-trust laws, specifically the section that talks about conspiracies in trade.

American Needle won at the local level. The NFL appealed and took it to the Federal level, where they won. American Needle appealed that to the Supreme Court.

The NFL's argument is that they're a single-entity with 32 franchises (think McDonald's). American Needle's argument says no you're not--you're 32 individual organizations working with a common goal.

The Supreme Court agreed with American Needle in a surprising unanimous vote. Justice John Paul Steves wrote the opinion of the court

"Although NFL teams have common interests such as promoting the NFL brand, they are still separate, profit-maximizing entities, and their interests in licensing team trademarks are not necessarily aligned,"

"Directly relevant to this case, the teams compete in the market for intellectual property," Stevens said. "To a firm making hats, the Saints and the Colts are two potentially competing suppliers of valuable trademarks."

This isn't a complete slam-dunk for American Needle (though it's close). What this decision does is bounce the case back to the lower courts to re-examine the issue of anti-trust again. (This particular argument was more about the NFL trying to dismiss the case out of hand, rather than arguing the actual anti-trust case.) With a 9-0 verdict against the NFL I have a tough time thinking that the lower court won't also rule against the NFL.

The most immediate impact with this is the labor negotiations. If the court had ruled in the NFL's favor the NFL could've really applied a great deal of pressure against the NFLPA.

Said DeMaurice Smith in a press release:

"Today's Supreme Court ruling is not only a win for the players past, present and future, but a win for the fans. While the NFLPA and the players of the National Football League are pleased with the ruling, we remain focused on reaching a fair and equitable Collective Bargaining Agreement. We hope that today also marks a renewed effort by the NFL to bargain in good faith and avoid a lockout."

Of course the NFL says that this case has no broader implications (but they tend to take an ostrich in the sand approach to many of their issues)

"The decision will simply result in American Needle's claim being sent back to the federal district court in Chicago, where the case will resume in its early stages." the league said in a statement.

"We remain confident we will ultimately prevail because the league decision about how best to promote the NFL was reasonable, pro-competitive, and entirely lawful. The Supreme Court's decision has no bearing on collective bargaining, which is governed by labor law."

Adam Brandt of the National Football Post says that there are two sides here. On the one side the NFL is right that this is a narrow decision that simply bounces the case back to the lower courts. However:

Conversely, the NFLPA can now at least have the appearance of negotiating leverage with the possiblity of decertification, meaning that they would cease to be a union in order to pursue antitrust claims in court. As a union, the players are bound by labor laws, which have been very favorable to management. As a decertified "association", the possibility for financial gains by players increases many fold, as the case in 1992, which led to the current CBA.

Most importantly, the ruling will -- hopefully -- jump start more productive talks toward a new agreement between the owners and players toward labor peace in the NFL past this season. These negotiations have been dormant for a while, as the owners have been reaping the advantages of the uncapped year. There are many issues to discuss: the continued existence -- or not -- of the Cap, player safety, player conduct, and the recent angst-ridden issue of performance-enhancing substances, which I will get to tomorrow.

I'm hopeful that this ruling will jumpstart the negotations for a new CBA. I'm also hopeful that American Needle wins it's case in the lower courts and opens up competition again for NFL apparel. That will have the side-effect of driving down prices. No more $25 hats, $30 t-shirts, $240 jerseys, etc.