Antitrust blitz: NFL ruling in Sunday Ticket case could have potentially broad implications for all professional sports | Flaster Greenberg PC

Before we get into what the NFL Sunday Ticket decision means if it survives the slew of post-trial motions and appeals that are expected to follow, let’s take a look at how the NFL got here. Professional sports leagues have been under scrutiny for their actions under Sections 1 and 2 of the Sherman Antitrust Act for more than a century. The first major sport to address the issue was baseball, with SCOTUS unanimously ruling that Major League Baseball (MLB) was exempt from the Sherman Act more than a century ago.(2) Interestingly, when it came to baseball, affectionately and historically called “America’s Pastime,” the Court found that there was no interstate commerce and therefore no violation of the Sherman Act, even though the Court in the same decision acknowledged that:

Each club in the league makes a profit not only by its ability to attract its own team at home, but also by the ability of the teams of the clubs which its team visits in the various cities of the league…. The continuous interstate activity of each (club) is essential to all the others. The clubs of each league constitute a business unit extending territorially over a number of different states.

One would assume that this would apply equally to all sports, but inexplicably that turned out not to be the case, and it remains so to this day. In 1957, SCOTUS made it clear that baseball was different from other sports when it took up the case of an American football player who was barred from playing for any NFL team because he had previously played in the All-America Football Conference (AAFC), then a rival league. The Court’s majority ruled that the NFL was not exempt from the Sherman Act and had in fact violated it. Justice Clark, writing for the majority, attempted to distinguish Federal Baseball and in this case, stating:

If this ruling is unrealistic, inconsistent, or illogical, it is sufficient to reply, leaving aside the distinctions between companies, that if we were to consider the baseball question for the first time on a clean slate, we should have no doubts. But Federal Baseball was conducting a baseball activity outside the scope of the Act. No other activity that claims to cover these cases has such a ruling. We therefore conclude that the orderly way to eliminate error or discrimination, if any, is through legislation, not by a court decision.(3)

Justice Harlan pointed out this hypocrisy in his dissenting opinion, stating, “I cannot distinguish football from baseball on the basis of the rationale Federal Baseball…and we find no basis for attributing to Congress the purpose of making baseball a separate sport…”(4)

The United States Department of Justice (DOJ) also tested the limits Federal Baseball a decision made just four years earlier Radovicin 1953, when it filed suit in the United States District Court for the Eastern District of Pennsylvania against the NFL and all of its member teams. The Justice Department challenged an NFL agreement that prohibited teams from broadcasting games within a seventy-five-mile radius of another team while that team was participating in a broadcast game away from home. The court found that the agreement between the NFL and its member teams was a clear attempt to monopolize broadcasting rights and was therefore an “unreasonable and illegal restraint of trade” in direct violation of the Sherman Act.(5) As a result, NFL teams were not subject to such territorial restrictions.

However, the NFL did not remain silent, attempting a similar action, hoping for a different outcome. In 1961, the same federal court, the Eastern District of Pennsylvania, firmly opposed this undisguised action, finding that the joint sale of broadcast rights also violated antitrust laws.(6)

Since the courts were unwilling to grant football the same exemptions as baseball, the NFL turned to the United States Congress for help. Congress granted a limited antitrust exemption, allowing for the joint sale and/or assignment of broadcasting rights. However, as the plaintiffs in NFL Sunday Ticket correctly noted, the Sports Broadcasting Act of 1961 exempted only “free broadcasts of professional sports events” and did not provide the same protection for paid, cable, or satellite distribution.(7)

The NFL was forced to revisit its vulnerability to the Sherman Act in 2009. The NFL teams formed National Football League Properties to develop, license, and market team-related apparel and other merchandise through exclusive licensing agreements. The Supreme Court found that such joint conduct by the NFL and its member teams did not fall outside the scope of the Sherman Act. The Supreme Court held that NFL teams could not combine to limit product and increase profits. The court further made clear that each team “is a substantial, independent, and independently operated enterprise” that competes with its rivals “not only on the field of play but also for fan attraction, ticket sales, and contracts with management and playing personnel,” as well as “in the intellectual property marketplace.”(8)

All of these decisions and congressional restrictions have led us here—to a place where the plaintiffs argued, and the jury agreed, that “instead of competing in the multibillion-dollar market for broadcast football games, they have banded together to limit supply and raise prices.” If this decision survives post-trial motions and appeals, the NFL will be forced to pay billions in damages to former individual Sunday Ticket subscribers and restaurants/bars. The broadcasting landscape could also undergo a seismic shift, with the NFL being prohibited from offering paid services that restrict out-of-market games. Additionally, it could lead to each team or league offering packages for individual markets—a benefit to those fans in each market who want to pay only for the games they want to watch, rather than for a package of games that would cost more. Finally, Congress could always get involved in expanding the limited exemptions created by the Sports Broadcasting Act of 1961.

The case will also have far-reaching implications for other professional sports leagues. Will courts now examine other deals? For example, Major League Soccer (MLS) entered into an exclusive 10-year deal with Apple to broadcast all of its games. MLS would likely argue that it has no restrictions on out-of-market games, distinguishing itself from the NFL in this way. It would also argue that, unlike the NFL, the entire league is a single entity structure in which investors can purchase the right to operate a team, and therefore each team is not a “substantial, independent, and independently operated enterprise” that competes with other teams on and off the field.

Only time will tell what the next antitrust challenge will be, but professional sports leagues, and even high school and college sports leagues, need to take antitrust seriously and avoid the traps the NFL has fallen into.

(1) In the case of: Antitrust proceedings concerning tickets for the Sunday National Football LeagueCase number ML15-02668 PSG (SKx).

(2) Federal Baseball Club of Baltimore, Inc. against the National League of Professional Baseball Clubs259 U.S. 200 (1922).

(3) Radovich vs. National Football League352 U.S. 445 (1957).

(4) ID. at number 456.

(5) United States vs. NFL116 F. Supp. 319 (E.D. Pa. 1953) (hereinafter referred to as “NFL-I“).

(6) United States vs. NFL196 F. Supp. 445 (E.D. Pa. 1961) (“NFL-II“).

(7) 15 U.S. Code § 1291-1292.

(8) American Needle, Inc. against the NFL560 U.S. 183, 196-97 (2010) (“American needle“).