NFL and Others Hope for a Favorable Supreme Court Ruling

June 29—Supreme Court Justices agreed to hear an antitrust case against
the National Football League regarding its exclusive licensing
agreement with Reebok. Having been thrown out at the federal appeals
level, American Needle Inc. has been seeking Supreme Court intervention
to its lost right to sell hats with NFL logos, alleging that the
NFL-Reebok deal violates antitrust regulations.

In taking a seemingly strange course of action, the NFL (along with the
NBA and the NHL) echoed American Needle’s requests for a S.C. ruling,
hoping that our highest court will extend its 1972 antitrust exemption
for Major League Baseball to their respective leagues. Antitrust
immunity, if asserted, will solidify Chicago Circuit Court’s previous
judgment warranting collusive marketing practices between the 32 NFL
teams and will provide precedent preempting costly, timely, and arduous
antitrust suits in the future.

Support for freeing our largest professional sports leagues from
antitrust regulation will largely depend on how the Supreme Court
defines the market in which they participate. Exemption is most likely
to be granted should markets be defined in terms of the broader scope
of the entertainment industry as a whole. Such market definition is
certainly feasible if sports are seen as sufficiently substitutable
with other forms of live and televised entertainment; the compass of
which can be extended to include live concerts, movie theaters, theater
productions, and beyond.

Increased inclusion of firms said to be competing within the same
market affords for increasingly conservative estimations of HHI and
price-cost margin—lower values for which indicate lesser concentrated
markets limiting firms’ ability to price above marginal cost, and
consequently their incentive for anticompetitive pricing strategy. The
computation of such indices represent potentially significant weight on
DOJ judgment, as there have been numerous rulings previous setting
precedent that defines anticompetitive behavior in terms of higher
price-cost margins and regards 1000 as the critical value for HHI,
maintaining higher industry concentrations are characterized by an
exceedingly undesirable ability for monopolistic behavior.
It should therefore be evident that the extent to which the market for
professional sports is defined from a macro perspective, judgment will
be more inclined to rule in favor of exempting sports leagues from
antitrust regulations within their boundaries.

Authors:
Brian McGuckin
Ka-Wa Chan

Article:
http://www.bloomberg.com/apps/news?pid=20601205&sid=aBLIFIr.jAhE