MELISSA BLOCK, host:
The Supreme Court whacked the National Football League today, along with most of the nation's big sports leagues. The justices ruled unanimously that the NFL's joint merchandising agreement, and by inference, similar agreements in other leagues are not automatically exempt from anti-monopoly laws.
NPR legal affairs correspondent Nina Totenberg reports.
(Soundbite of cheering)
NINA TOTENBERG: The NFL dropped back into the pocket for a Hail Mary pass. The league thought it could score big time, and so did the other leagues cheering in the stands; the NBA, the NHL. But they all got sacked by the Supreme Court and its 90-year-old senior justice, John Paul Stevens.
On the surface, the issue was exclusive merchandising agreements. But potentially, the case was about much more. The immediate facts were these. It used to be that the NHL licensed lots of companies to manufacture and sell caps, shirts, sweatshirts, all the stuff with team logos. But in 2000, the NFL followed in the footsteps of other sports leagues. It decided to award its merchandising license for all 32 teams to just one manufacturer, Reebok.
Among those frozen out was American Needle, a family-owned company that makes caps.
Mr. ROBERT KRONENBERGER (President, American Needle): My grandfather started it back in 1918 and then it was my father. And now, it's my brother and myself.
TOTENBERG: Robert Kronenberger, the owner of American Needle, decided to fight.
Mr. KRONENBERGER: This business is in my blood and we were very, very good at it. And I just believe that by their doing this, they squelch all creativity and everything else.
TOTENBERG: So Kronenberger and his company went to court, claiming that the 32 teams operating through the NFL had conspired to give Reebok an illegal monopoly that resulted in prices for high-ended fitted caps jumping from $19 to $30. The NFL countered that the league is a single business and thus is exempt from such antitrust suits. A federal appeals court agreed, but then an odd thing happened.
When American Needle appealed to the Supreme Court, the NFL took a calculated gamble, that Hail Mary pass. Even though it had won in the lower courts, the NFL supported the request that the Supreme Court hear the case, hoping apparently, that a Supreme Court win would enable the league to set prices not just for jerseys and caps, but for everything from game tickets to concessions to fees for playing fantasy football video games.
The other sports teams jumped in to support the NFL, among them, the NBA, the NHL, even NASCAR. Today, they went splat. The Supreme Court unanimously rejected the league's single entity theory.
Writing for the court, Justice Stevens suggested the NFL operated more like a cartel than a single firm seeking to maximize profits. The court then sent the case back to the lower courts for a determination as to whether in this particular case, the NFL conspired to stifle competition or was simply operating in the most efficient manner for its business.
NBA Commissioner David Stern says the loss in the Supreme Court will cost the leagues money, but not much else.
Mr. DAVID STERN (Commissioner, National Basketball Association): It's more costly. It's more likely to go to a jury and will result in more frivolous litigations. But at the end of the day, we expect to prevail.
TOTENBERG: Perhaps, but a lot of sports law experts say the leagues risk serious losses if these kinds of cases go to juries.
Professor MICHAEL McCANN (Vermont Law School): What they really wanted, they didn't get.
TOTENBERG: Vermont Law School Professor Michael McCann says the leagues have contractual agreements that they had hoped to protect from court challenges.
Prof. McCANN: Other types of contracts could include broadcasting contracts, video game licensing contracts, decisions by a league to prevent other owners from relocating without permission.
TOTENBERG: Among those breathing a sigh of relief today were the players unions, which feared the owners could impose salary caps and end free agency.
The court, however, did leave some wiggle room for the NFL and other leagues, noting, for example, that leagues have a legitimate and important interest in maintaining a competitive balance among athletic teams.
But on this day, there's one guy in suburban Chicago who's very happy: Bob Kronenberger, the owner of American Needle.
Mr. KRONENBERGER: The nice thing about the ruling today is it just goes to show that once in a while, you can go all the way with your principles and actually prevail.
TOTENBERG: Nina Totenberg, NPR News, Washington.
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