American Express v. Italian Colors Restaurant - Public Justice Amicus Brief o...
ABA Newsletter Fall 2010 (N2192961) (2)
1. Fall 2010 The Trade, Sports and Professional Associations Committee Newsletter
INFORMATION EXCHANGE
THE TRADE, SPORTS AND
PROFESSIONAL ASSOCIATIONS
COMMITTEE NEWSLETTER
American Bar Association Section of Antitrust Law
AGENDA
American Needle: A Strong Undercurrent on the
Treatment Of Manifestly Pro-Competitive Re-
straints under the Rule
Of Reason 1
Message From the Chair 3
There is Only One National
Football League 21
Canadian Needle? 31
Does American Needle Open the Door
For More Competition Between
Soccer Clubs in the United States? 38
Cases to Watch 43
CLE 48
In its recently-issued unanimous decision
in American Needle, Inc. v. National Foot-
ball League Co. et. al.,1
the United States
Supreme Court addressed whether its Cop-
perweld doctrine2
shielded the National
Football League’s (“NFL”) decision to
award an exclusive license to Reebok to
produce trademarked head gear for all 32
teams from antitrust scrutiny under Section
1 of the Sherman Act. The Copperweld
doctrine holds that joint decisionmaking by
two or more entities does not constitute the
requisite combination, conspiracy, or
agreement to trigger Section 1 if those enti-
ties are controlled by a single center of de-
cisionmaking and constitute a single aggre-
gation of economic power.3
The American
Needle Court held that the NFL teams did
not have either the unitary decision-making
or the single aggregation of economic
AMERICAN NEEDLE:
A STRONG UNDERCURRENT ON THE
TREATMENT OF MANIFESTLY PRO-
COMPETITIVE RESTRAINTS UNDER THE
RULE OF REASON
EMILIO E. VARANINI*
(continued on page 4)
2. Fall 2010 The Trade, Sports and Professional Associations Committee Newsletter 2
THE TRADE, SPORTS AND PROFESSIONAL
ASSOCIATIONS COMMITTEE NEWSLETTER
* * Leadership * * * * Editors * *
David Meyer, Chair
Morrison & Foerster LLP
2000 Pennsylvania Avenue, N.W., Suite 6000
Washington, D.C. 20006-1888
(202) 887-1519
dmeyer@mofo.com
Frank M. Hinman, Vice Chair
Bingham McCutchen, LLP
Three Embarcadero Center
San Francisco, California 94111-4067
(415) 393-2462
Karin Moore, Vice Chair
Wine & Spirit Wholesalers of America, Inc.
805 15th Street, N.W., Suite 430
Washington, D.C.
(202) 371-9792, ext. 311
Christine Sommer, Vice Chair
Crowell & Moring
1001 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2595
(202) 624-2944
Dorothy Gill Raymond, Vice Chair
Law Offices of Dorothy Gill Raymond
7501 Weld County Road 7
Erie, Colorado 80516
(303) 818-6563
Mark Whitener, Council Liaison
Senior Counsel, Competition Law & Policy
General Electric Company
Washington, D.C.
(202) 637-4370
Christine Sommer, Vice Chair
Crowell & Moring
1001 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2595
(202) 624-2944
Karin Moore, Web Page Editor
Wine & Spirit Wholesalers of America, Inc.
805 15th Street, N.W., Suite 430
Washington, D.C.
(202) 371-9792, ext. 311
Mark A. Cunningham, Publisher
Jones, Walker, Waechter,
Poitevent, Carrere & Denegre, L.L.P.
201 St. Charles Avenue
New Orleans, Louisiana 70170-5100
(504) 582-8536
mcunningham@joneswalker.com
_________________________
INTERESTED IN JOINING
THE COMMITTEE?
For more information, contact:
David Meyer, Chair
Morrison & Foerster LLP
2000 Pennsylvania Avenue, N.W.
Suite 6000
Washington, D.C. 20006-1888
dmeyer@mofo.com
or
Visit our Website at
http://www.abanet.org/antitrust/committees
_________________________
3. Fall 2010 The Trade, Sports and Professional Associations Committee Newsletter 3
MESSAGE FROM THE CHAIR
The TSPA Committee plans, for the 2010-
2011 year, to capitalize on the attention being
paid to trade associations and sports leagues as
a result of the American Needle decision.
Like the old saying goes, “Now that we have
your attention…”
New Vice Chairs Karin Moore, of the Wine
and Spirits Wholesalers of America
[Karin.Moore@wswa.org], and Christine Som-
mer, of Crowell [CSommer@crowell.com],
join returning Vice Chairs Frank Hinman, of
Bingham [frank.hinman@bingham.com], and
Dorothy Raymond, former general counsel of
Cable Television Laboratories, Inc.
[dorothy@dorothyraymond.com], in working
with me this year. Many thanks to Jerry Swin-
dell and Emilio Varanini, who made great con-
tributions to the Committee’s activities last
year.
Following through on American Needle, this
issue of our newsletter features four articles
addressing different implications of the deci-
sion. We also have our regular “Cases to
Watch” section. Interested in seeing your
name in print? Our next newsletter is targeted
for February, 2011 so let me or our new editor,
Christine Sommer, know if you have ideas for
articles.
Our Committee is co-sponsoring two programs
for the 2011 Spring Meeting; one on the im-
pact of American Needle and one on the role of
(alleged) trade association activities in recent
criminal investigations and civil litigation al-
leging horizontal price fixing among industry
members.
We have several programs in the works, in-
cluding how to preserve the attorney-client
privilege in the context of trade association
counseling and a nuts and bolts seminar on
trade association counseling. If you have
other ideas for programs, please let me
know.
Updating our website (http://
www.abanet.org/dch/committee.cfm?
com=AT326000 ) is another priority for the
coming year. We have links to the Ameri-
can Needle decisions, the Supreme Court
briefs, the oral argument transcript, and
some of the commentaries. There’s more to
this committee than American Needle,
however, so we are striving to develop a
more complete listing of resources for
practitioners in this area. Karin Moore is
looking for volunteers to help her keep the
website up-to-date and a useful resource
for our members.
T h e T S P A l i s t s e r v ( A T -
TA@MAIL.ABANET.ORG) is intended
for use by all committee members to post
information about new developments. If
you haven’t subscribed, the link to do so is
on the TSPA web page. If you haven’t
contributed to the listserv, please feel free
to share your thoughts, experiences or
questions.
Last but not least, we want to get all com-
mittee members involved in our activities.
If you have ideas for what the TSPA ought
to be working on, or have needs in your
law practice in this substantive area that we
can help you with, we want to hear from
Visit our Website at
http://www.abanet.org/antitrust/
committees
4. Fall 2010 The Trade, Sports and Professional Associations Committee Newsletter 4
you. If you haven’t responded to our sur-
vey asking for your input, please be sure to
do so now. We are also planning a town
hall/networking committee program for
this fall. Finally, if you’re going to be at
the Spring Meeting in Washington D.C.
this year, we’ll have a table at the opening
reception and look forward to seeing you
there.
David Meyer
Chair
Trade, Sports, and Professional
Associations Committee
Antitrust Section
American Bar Association
Morrison & Foerster LLP
202-887-1519
dmeyer@mofo.com
power characteristic of action by a single
firm.4
This holding of American Needle is
well-recognized in the main.5
However, the American Needle opinion has
undercurrents that have been little dis-
cussed since the decision. These undercur-
rents are worth careful study by courts, an-
titrust enforcers, and corporate advisers.
One significant suggestion by the Court is
that federal courts should consider an early
reverse “quick look” analysis of restraints
falling within the ambit of the rule of rea-
son.6
When applying a reverse quick look analy-
sis, a restraint that is plainly pro-
competitive (according to the understand-
ing of an observer with nothing more than
a rudimentary understanding of economics)
is a reasonable, and hence legal, restraint
unless the plaintiff can proffer evidence
that such a restraint may have an anti-
competitive effect.7
Restraints that are nec-
essary for a legitimate joint venture to
function at all - e.g., price-setting as to the
good to be produced by the joint venture -
would seem to fit within this category.8
In turn, such a reverse quick look analysis
could occur via an early motion for sum-
mary judgment.9
Provided the lower courts
are sufficiently sensitive to discovery and
proof issues that may occur at such an early
point in the case,10
a limited reverse “quick
look” analysis might well allow the sepa-
rating of the wheat from the chaff in as-
sessing restraints - the very task that not
only so troubled the Court in American
Needle11
but has troubled the Court in other
(continued from page 3) (continued from page 1)
5. Fall 2010 The Trade, Sports and Professional Associations Committee Newsletter 5
cases before it in the past few years.12
History of United States Supreme Court
Precedent on Quick Look
To understand how a reverse quick look
analysis might work, it is first necessary to
examine its inverse twin: the ordinary quick
look doctrine. The ordinary quick look doc-
trine first arose in National Soc. of Profes-
sional Engineers v. United States.13
In Professional Engineers, the High Court
addressed the question of whether the defen-
dant-association’s bar on competitive bid-
ding for engineering services violated Sec-
tion 1 of the Sherman Act.14
The Court ob-
served that, under the rule of reason inquiry
applicable to Section 1 of the Sherman Act
per its Standard Oil decision,15
a court could
strike down a restraint as being unreasonable
based either on (a) the nature and character
of the restraint or (b) on surrounding circum-
stances giving rise to the inference or pre-
sumption that the restraint was intended to
restrain trade or enhance prices.16
The Court
further noted that, for restraints ancillary to
lawful joint activity, it had evolved a rule of
reason test that compared the pro- and anti-
competitive effects of that restraint.17
Turning to the restraint at issue, the Court
had no trouble finding that while the restraint
was not per se illegal price-fixing, it could
condemn the restraint as being anti-
competitive without any elaborate industry
analysis as it impeded the ordinary give and
take of the market place by depriving the
customer of the ability to utilize and compare
prices in selecting engineering services.18
The Court further observed that the defen-
dants’ argument - that competition was bad
- did nothing to refute the anti-competitive
purpose and effect of the agreement.19
The ordinary quick look doctrine next
arose in a more substantial way in National
Collegiate Athletic Assoc. v. Board of Re-
gents of the University of Oklahoma et. al.20
The High Court there addressed the ques-
tion of whether the National Collegiate
Athletic Association (“NCAA”) infringed
Section 1 of the Sherman Act by limiting
live television broadcasts for all of its
member teams’ football events exclusively
to two television companies who agreed to
follow certain rules. Those rules included
fixing prices for live broadcasts solely ac-
cording to the intended geographic range of
the broadcast, and ensuring that each mem-
ber team obtained a certain number of ap-
pearances, in order to limit the effect of
live television broadcasting on game atten-
dance.21
Although the NCAA Court agreed that hori-
zontal restrictions on price and output were
per se illegal (i.e., said practices can not be
excused or justified), it refused to apply a
per se illegal analysis to these restraints.22
Instead, it applied a rule of reason analysis,
noting that some restraints on competition
were necessary for products such as league
sports that needed to be produced jointly in
order to be made available at all.23
However, the Court then recognized that
the restraints at issue had significant anti-
competitive potential: they restricted
member teams from selling their own tele-
vision rights and thus increasing the num-
ber of games on television; raised the
prices that networks had to pay for those
(continued from page 4)
6. Fall 2010 The Trade, Sports and Professional Associations Committee Newsletter 6
games that they could televise; and elimi-
nated competitors from the market by limit-
ing the broadcasters who could bid to tele-
vise games.24
It noted that these anti-
competitive consequences - restricting price
and output - were “apparent” and the
“paradigmatic examples of restraints on trade
that the Sherman Act was intended to pre-
vent.”25
When the NCAA argued that these restraints
could not have an anti-competitive effect be-
cause it lacked market power, the Court re-
jected that argument on the legal ground that,
“where there is an agreement not to compete
in terms of price or output, no elaborate in-
dustry analysis is required to demonstrate the
anti-competitive character of such an agree-
ment.”26
In a footnote, the Court then ob-
served that the ability for firms to impose
lawful restraints such as joint buying and
selling did not impede the courts from being
able to enjoin without a trial an agreement
between the then two biggest car manufactur-
ers to employ a single joint seller as that
agreement would impede important price
competition and could hardly be justified.27
The Court thereupon concluded this footnote
by observing that “the essential point is that
the rule of reason can sometimes be applied
in the twinkling of an eye.”28
The NCAA Court next observed that “these
hallmarks of anti-competitive behavior place
upon petitioner a heavy burden of establish-
ing an affirmative defense which competi-
tively justifies this apparent deviation from
the operations of a free market.”29
Although
the NCAA proffered a number of pro-
competitive justifications, the Court summa-
rily rejected all of them.30
The United States Supreme Court next ap-
plied the quick look doctrine in Federal
Trade Commission v. Indiana Federation
of Dentists.31
Here, the United States Su-
preme Court addressed the question of
whether the policy of the organization of
dentists to withhold the x-rays of patients
from dental insurers violated Section 1 of
the Sherman Act where the joint policy had
the effect of limiting the ability of insurers
to have dentists compete for the business of
those patients covered by those insurers.32
While the Court recognized that this prac-
tice resembled group boycotts that it had
previously adjudged to be per se illegal, it
refused to accord per se treatment here for
three reasons: (a) it had backed away from
according per se treatment to group boy-
cotts; (b) it was reluctant to condemn rules
adopted by professional organizations as
unreasonable per se; and (c) it was also re-
luctant to extend per se analysis to re-
straints imposed in the context of certain
types of joint relationships where the eco-
nomic effects of those restraints in the con-
text of those relationships may not be
“immediately obvious.”33
Nonetheless, the Court found no great dif-
ficulty in adjudging the restraint to be ille-
gal under a quick look rule of reason analy-
sis. It reasoned that a joint agreement to
withhold information desired by customers,
while not price-fixing, did not require an
elaborate industry analysis in order to find
it to be anti-competitive.34
The Court re-
jected the notion that, with such a “naked”
restraint, the FTC nonetheless should have
been required to show market power.35
It
further rejected the notion that the FTC
should have been required to show that the
(continued from page 5)
7. Fall 2010 The Trade, Sports and Professional Associations Committee Newsletter 7
restraint resulted in higher prices (or, to be
more precise, the purchase of higher-priced
services).36
Quite to the contrary, because an
agreement on its face limited customer
choice by impeding “the ordinary give and
take of the marketplace,” the Court immedi-
ately placed on the defendant the burden of
demonstrating a precompetitive virtue such
as “the creation of efficiencies in the opera-
tion of a market” or the “provision of goods
and services.”37
The defendant-association
offered no evidence of any such redeeming
pro-competitive virtues.38
Finally, in California Dental Association v.
FTC,39
the United States Supreme Court
elaborated on the circumstances under which
a quick look analysis could be employed.
The Cal. Dental Ass’n. Court addressed the
issue of whether the dental association’s re-
stricting price advertising, particularly dis-
count fees, and quality of service advertising
on the ground that such advertising could be
misleading advertising violated Section 1 of
the Sherman Act.40
In deciding whether the lower court’s appli-
cation of quick look was appropriate,41
the
High Court first summarized its previous
cases as involving a judicial inquiry into
whether “an observer with even a rudimen-
tary understanding of economics could con-
clude that the arrangements in question
would have an anti-competitive effect on
customers and markets.”42
However, the
Court, in a 5-4 decision, then contrasted the
instant case with those previous cases in
which it had applied quick look analysis in
finding that the likelihood of anti-
competitive effects was not “comparably ob-
vious.”43
The majority noted that, even if the view of
the dissent were correct that bans on truth-
ful and verifiable price advertising were
prima facie anti-competitive, the bans on
advertising here were “designed to avoid
false or deceptive advertising in a market
characterized by striking disparities be-
tween the information available to the pro-
fessional and the patient.”44
In reaching
this conclusion, the Court placed heavy
emphasis on various economic studies and
articles, both legal and economic, analyz-
ing markets for complex professional ser-
vices or medical services.45
The majority conceded that it could turn
out, on a fuller analysis, that the restric-
tions in question might have no competi-
tive effect, or even an anti-competitive ef-
fect.46
It further conceded that the dissent’s
“through-going de novo antitrust analysis”
had “much to impress on its own merits”
and that the lower court’s opinion might
have been sustained had it engaged in the
same analysis as the dissent.47
However,
“the plausibility of competing claims about
the effects of the professional advertising
restrictions rule[d] out the indulgently ab-
breviated review to which the [FTC’s] or-
der was treated” by the lower court.48
In its final analysis, the majority cautioned
that “[s]aying here that the Court of Ap-
peal’s conclusion at least required a more
extended examination of the possible fac-
tual underpinnings than it received is not
necessarily to call for the fullest market
analysis.”49
It reasoned that even if a case
were not subject to quick look analysis, it
did not follow that it must automatically be
subject to plenary market examination.50
It
(continued from page 6)
8. Fall 2010 The Trade, Sports and Professional Associations Committee Newsletter 8
then elaborated on this point as follows:
Indeed, the scholar who enriched anti-
trust law with the metaphor of “the
twinkling of an eye” for the most con-
densed rule-of-reason analysis him-
self cautioned against the risk of mis-
leading even in speaking of a
“spectrum” of adequate reasonable-
ness analysis for passing upon anti-
trust claims: “There is always some-
thing of a sliding scale in appraising
reasonableness, but the sliding scale
formula deceptively suggests greater
precision than we can hope for....
Nevertheless, the quality of proof re-
quired should vary with the circum-
stances.” P. AREEDA, ANTITRUST
LAW ¶ 1507, p. 402 (1986). [Footnote
omitted.] At the same time, Professor
Areeda also emphasized the neces-
sity, particularly great in the quasi-
common-law realm of antitrust, that
courts explain the logic of their con-
clusions. “By exposing their reason-
ing, judges ... are subjected to others'
critical analyses, which in turn can
lead to better understanding for the
future.” Id., ¶ 1500, at 364. As the
circumstances here demonstrate, there
is generally no categorical line to be
drawn between restraints that give
rise to an intuitively obvious infer-
ence of anticompetitive effect and
those that call for more detailed treat-
ment. What is required, rather, is an
enquiry meet [sic] for the case, look-
ing to the circumstances, details, and
logic of a restraint. The object is to
see whether the experience of the
market has been so clear, or neces-
sarily will be, that a confident con-
clusion about the principal tendency
of a restriction will follow from a
quick (or at least quicker) look, in
place of a more sedulous one.51
The Court cited in a footnote a number of
commentators as supporting this sliding
scale approach of judicial inquiry.52
The dissent agreed with these latter points
articulated by the majority as to this sliding
scale mode of rule of reason analysis.53
However, the dissent argued that the Court
could have upheld the decision of the lower
court even on a more discerning analysis.54
The Rise of the Reverse Quick Look Doc-
trine in American Needle
Next, to understand how the American
Needle Court came to suggest what this
article refers to as the reverse quick look
doctrine, it is important to look at the back-
ground behind American Needle, starting
with the appellate opinion that was re-
versed by American Needle. In response
to plaintiff American Needle’s assertion
that the NFL’s award of an exclusive li-
cense for its teams’ intellectual property
(e.g., team logoed-clothes) to Reebok vio-
lated Section 1 of the Sherman Act, the
Seventh Circuit Court of Appeals ruled that
the Copperweld doctrine immunizing sin-
gle-entity conduct involving a parent and
its wholly-owned subsidiaries had to apply
to the NFL itself because only the football
league itself, as opposed to an individual
football team, could produce a football
game.55
The lower court further remarked
that antitrust law encouraged cooperation
inside such a business organization so that
(continued from page 7)
9. Fall 2010 The Trade, Sports and Professional Associations Committee Newsletter 9
the organization as a whole could compete
against other providers of entertainment.56
Next, insofar as the licensing of intellectual
property was concerned, the lower court rea-
soned the record amply establishes that since
1963, the NFL teams have acted as one source
of economic power-under the auspices of
NFL Properties-to license their intellectual
property collectively and to promote NFL
football.”57
The Seventh Circuit thereupon
affirmed the judgment of the district court dis-
missing plaintiff American Needle’s case un-
der Copperweld.
This concern about asserted pro-competitive
joint conduct undergoing searching antitrust
scrutiny took on additional wings in the cer-
tiorari process in front of the United States
Supreme Court. In response to the petition for
certiorari by plaintiff American Needle, the
NFL filed a document that supported plain-
tiff’s petition for certiorari, even though it had
won in the lower court. It specifically argued
that Copperweld should be extended to any
highly integrated joint venture as rule of rea-
son inquiry into those ventures chill collabo-
ration, and thus interbrand competition.58
It
further observed that sport leagues were fac-
ing a “cascade” of antitrust suits challenging
how they produce an integrated entertainment
product,59
most of which proceeded to full
rule of reason review,60
and that other joint
ventures faced the same problem.61
After certiorari was granted, this concern
again arose in the context of oral argument in
front of the High Court. In the High Court’s
questioning of plaintiff’s counsel, Justice So-
tomayor asked whether the system of exclu-
sive licensing was pursuant to a joint venture
such that the instant case could be distin-
guished from the Court’s NCAA decision.62
Justice Kennedy asked about whether
changes in football rules would give rise to
a Section 1 cause of action and, when
plaintiffs’ counsel replied that a challenge
to those changes would not be a plausible
rule of reason claim, responded “you know
the litigation system. How do we know?”63
He further asked if plaintiff’s counsel could
give “a zone where we are . . . . will be sure
that rule of reason inquiry is inappropriate.
We can take care of it on summary judg-
ment.”64
In responding to this question,
plaintiff’s counsel interpreted NCAA as
standing for the proposition that rules and
regulations promulgated by the league
were presumptively pro-competitive be-
cause they are integral to, and bound up
with, the creation of the product itself,
football.65
Justice Ginsburg noted in passing that if
you have a rule of reason analysis, then
you have to have discovery, which can be
very costly.66
Chief Justice Roberts, in ask-
ing plaintiff’s counsel for his view as to the
position articulated by the Solicitor Gen-
eral, observed that the Solicitor General’s
brief was a response to the contention that
it seemed “odd” to subject issues such as
the rules of the game to a rule of reason
analysis.67
In the context of responding to
this latter point, plaintiff’s counsel ad-
vanced the (as it turns out) highly impor-
tant point:
There are certain issues that this
Court has said come up in a rule of
reason analysis, and to quote this
Court from Cal Dental, “can be dealt
with in the twinkling of an eye;” that
is some claims, as the NCAA Court
(continued from page 8)
10. Fall 2010 The Trade, Sports and Professional Associations Committee Newsletter 10
said, are not going to be rule of reason
claims and can be dismissed on the
pleadings. The Court said that in
Twombly as well.68
Justice Stevens, who would turn out to be the
author of the Court’s American Needle opin-
ion, presaged that opinion when he responded
to this remark as follows: “And as I under-
stand your position that could be the result in
this case.”69
Set against this background, it is thus no stray
remark for the United States Supreme Court
in its unanimous opinion to have cited its
NCAA decision for the proposition that joint
ventures (or necessary restraints ancillary to
those ventures) which were necessary for a
product to be marketed at all could survive
rule of reason inquiry “in the twinkling of an
eye.”70
Rather, this point can only be as a
carefully considered signal from the Court to
the lower courts that it would approve a more
aggressive handling and disposal of rule of
reason cases in using not only offensive quick
look but also defensive - or as this article calls
it reverse - quick look.
The Application of Reverse Quick Look
The application of a reverse quick look doc-
trine first raises the question of how to deter-
mine when a restraint can be considered to be
plainly pro-competitive according to an ob-
server with nothing more than a rudimentary
understanding of economics. In applying an
ordinary quick look analysis under the rule of
reason, i.e., in determining whether a restraint
would have an anti-competitive effect obvious
to an observer with only a rudimentary under-
standing of economics, the federal courts
have examined the restraint in question as a
general matter before turning to whether a
pro-competitive reason for the restraint
nonetheless existed under the particular
circumstances of that case.71
By way of an inverse analogy, the same
would necessarily need to hold true of an
assessment of a restraint under a reverse
quick look analysis. Accordingly, it would
need to be the case that a restraint must,
generally speaking, have at the very least a
pro-competitive effect from the perspective
of an observer with only a rudimentary un-
derstanding of economics. Of course, any
particularities in the restraint at issue must
be carefully considered to ensure that the
restraint in question does not so deviate
from other similar restraints that it would
not have the same pro-competitive effect.72
But, how do you determine whether an ob-
server with a rudimentary understanding of
economics would find a restraint to be pro-
competitive? At bottom, the courts must
determine whether a consensus exists as to
a restraint’s generally pro-competitive na-
ture - to be followed by careful considera-
tion as to whether the particular circum-
stances of the restraint under consideration
would differentiate that restraint to such an
extent that the consensus would no longer
be applicable.73
The next question is whether such a reverse
quick look analysis can be conducted via
an early motion for summary judgment.
The answer is a qualified yes.
In the first instance, there is manifest au-
thority supporting the proposition that the
courts may entertain an early motion for
(continued from page 9)
11. Fall 2010 The Trade, Sports and Professional Associations Committee Newsletter 11
summary judgment when one party submits
evidence extraneous to the complaint and the
other party cannot demonstrate a need for fur-
ther discovery.74
The standard for summary
judgment, early or not, is whether there is a
triable issue of material fact.75
An ordinary
quick look analysis is well-suited for sum-
mary judgment because, while empirical evi-
dence can help confirm or rebut the assertion
that a restraint is obviously anti-competitive,
such evidence is not necessary to making such
a determination.76
Just as an ordinary quick look analysis does
not require empirical evidence for a conclu-
sion to be drawn as to whether a restraint is
obviously anti-competitive77
so too should it
be the case that a reverse quick look analysis
not require empirical evidence for a conclu-
sion to be drawn as to whether a restraint is
obviously pro-competitive.78
Moreover, be-
cause an ordinary quick look analysis cannot
be defeated on summary judgment merely by
observing that its application may potentially
chill some pro-competitive conduct as an ab-
stract matter,79
the inverse conclusion must
also be true for a reverse quick look analysis.
A reverse quick look analysis can not be de-
feated on summary judgment merely by point-
ing out that its application may potentially
excuse anti-competitive conduct as an abstract
matter.80
Accordingly, it would seem that
such an analysis could be conducted via a mo-
tion for summary judgment given that the
touchstone of such an analysis in the quick
look context would be whether a triable issue
of material fact exists as to the obvious com-
petitive effect of a restraint.
However, although empirical evidence is not
germane to the first step of a quick look
analysis, and thus to a reverse quick look
analysis, it is germane to any rebuttal via a
showing of pro-competitive efficiencies in
the case of an ordinary quick look analy-
sis81
or a showing of anti-competitive ef-
fects in the case of a reverse quick look
analysis. In the case of an ordinary quick
look analysis, it is defendants who are most
likely to have the kind of empirical evi-
dence necessary to make a showing of pro-
competitive efficiencies such that discov-
ery on this point would either be truncated
or completely unnecessary.82
From this
point, the conclusion logically flows that a
grant of an early motion for summary judg-
ment in the ordinary quick look context is
highly unlikely to prevent defendants from
having their day in court.
A reverse quick look analysis, however, is
a bit more nuanced in terms of plaintiffs
having their day in court. To rebut a pre-
sumption of pro-competitive efficiencies
under such an analysis, plaintiffs would
need to point either to actual anti-
competitive effects arising from the re-
straint or to an inference of anti-
competitive effects arising from those
firms using the restraint collectively enjoy-
ing market power.83
Moreover, the intent
of the parties engaged in the joint activity
may shed light on the competitive nature of
that activity.84
All of these points may re-
quire some discovery from defendants who
are likely to have admissible information as
to their intent in entering into, or perpetuat-
ing, the restraint or as to the nature of the
market in which they operate. And, in this
respect, it is no answer to suggest that
plaintiffs can simply proffer an expert
analysis speculating as to the possible exis-
tence of anti-competitive effects, whether
(continued from page 10)
12. Fall 2010 The Trade, Sports and Professional Associations Committee Newsletter 12
in fact or via inference, as a court may not
consider speculative expert opinions in ruling
on a motion for summary judgment.85
Yet, a potential need for discovery on the part
of plaintiffs in a reverse quick look analysis
does not necessarily translate into a need for
the kind of full-bore, expensive discovery
which the federal courts view as being a seri-
ous burden.86
Faced with an early motion for
summary judgment on a reverse quick look
analysis, the courts may wish to first inquire
as to whether plaintiffs may be able to point to
publicly-available information on the market,
or on observed effects of a restraint,87
to dem-
onstrate that a triable issue of material fact
exists as to anti-competitive effects in order to
escape a reverse quick look analysis and ob-
tain fuller discovery. Furthermore, the courts
may wish to inquire of both parties as to the
extent to which they would stipulate to facts
that would assist the courts in making a deter-
mination as to the ability of plaintiffs to make
a showing of plausible anti-competitive ef-
fects should it allow for fuller discovery.88
(The incentive for defendants to agree to
stipulated facts would be to avoid the ex-
penses and intrusive discovery – not to men-
tion an expensive and time-consuming trial in
front of a jury - on a wide-range of issues as-
sociated with a full-bore rule of reason inquiry
involving disputed facts.)89
Finally, as empiri-
cal evidence of actual anti-competitive effects
may be difficult to uncover, plaintiffs may be
able to point to material deviations regarding
the structure of the restraint in question, cou-
pled with circumstances surrounding the re-
straint, as leading to an inference of the exis-
tence of actual anti-competitive effects which
would justify fuller discovery.90
Conversely,
if plaintiffs have nothing to point to by way
of publicly-available information, of stipu-
lated or disputed facts, or of circumstances
surrounding the particular restraint, to sug-
gest that a triable issue of material fact may
exist as to whether an ostensibly pro-
competitive restraint is in fact anti-
competitive, then a grant of summary judg-
ment on a reverse quick look analysis may
be appropriate.91
What kind of restraints would be subject to
exculpation under a reverse quick look
analysis? In the first instance, the forma-
tion of a joint venture between competitors
would be subject to early exculpation under
a reverse quick look analysis if the forma-
tion of the venture served precompetitive
goals such as the manufacture or sale of a
product that could not be produced effi-
ciently or independently by the venture’s
participants.92
Moreover, restraints central
to the ability of a legitimate joint venture to
achieve its pro-competitive goals, such as
the fixing of a price on the product to be
marketed by the joint venture,93
or collec-
tive decisions involving the rules govern-
ing play in a sports league context,94
would
also be subject to early exculpation under a
reverse quick look analysis.
A more interesting example of the applica-
tion, and the limits, of the reverse quick
look doctrine would be patent pools. It
should be obvious to an observer with even
a rudimentary understanding of economics
that patent pools formed by patent owners
whose patents are essential to the produc-
tion of a product can “provide pro-
competitive benefits by integrating comple-
mentary technologies, reducing transaction
costs, clearing blocking positions, and
avoiding costly infringement litigation.”95
(continued from page 11)
13. Fall 2010 The Trade, Sports and Professional Associations Committee Newsletter 13
Thus, patent pools, on their face, would be
susceptible to being exculpated when faced
with a rule of reason challenge in the twin-
kling of an eye.96
However, even with reverse quick look analy-
sis, circumstance can be king and queen.97
It
should be equally obvious to an observer with
even a rudimentary understanding of econom-
ics that a patent pool can go rogue becoming
an illegal mechanism to fix prices, extend pat-
ents past their expiration term, bar competing
end products, and split profits: as just one
indicative and intuitive example, a patent pool
could be expanded beyond complementary
patents strictly necessary to the manufacturing
of an end product to include invalid or expired
patents or competing patents.98
In such cir-
cumstances, a more sedulous inquiry may
well be called for, requiring additional
(perhaps tailored) discovery which may lead
to a later-in-time motion for summary judg-
ment if not a full-blown rule of reason trial in
front of a jury.99
Conclusion
The rule of reason is not an enquiry that
should degenerate into oscillation between
two mutually opposite poles:100
one pole be-
ing the view that defendants almost always
win because of a suspicion of antitrust plain-
tiffs that is translated into Himalayan barriers
of proof;101
the other pole being an analysis in
which plaintiffs nearly always win as long as
they can postulate any sort of anti-competitive
effect supported by a bare sheen of evidence
following costly, full bore discovery.102
The
application of ordinary quick look, and, fol-
lowing American Needle’s prodding, reverse
quick look provides the federal courts with
ample tools to separate early anti-
competitive goats from pro-competitive
sheep while ensuring that a jury can decide
close questions of competitive effect. By
using such tools, the federal courts not only
would be carrying out the wishes of the
High Court but also would be restoring the
balanced common law approach of their
judicial counterparts in the past.103
END NOTES:
• Emilio Varanini is the former Vice-Chair,
Trade, Sports, and Professional Associa-
tions Committee, American Bar Associa-
tion, Antitrust Section and the current
Vice-Chair, Communications and Digital
Technologies Committee, American Bar
Association, Antitrust Section; Chair, In-
ternational Committee, National Associa-
tion of Attorneys General, Antitrust Task
Force; and Deputy Attorney General, Cali-
fornia Attorney General’s Office, San
Francisco, California. Emilio Varanini is
also the Chair of the multistate litigating
group in the price-fixing case State of Cali-
fornia et. al. v. Infineon Technologies et.
al., C 06-4333 PJH. The views expressed
herein are those of the author only and
should not be attributed to the California
Attorney General’s Office, to the National
Association of Attorneys General, or to the
American Bar Association.
1. All citations to this decision will be to the
slip opinion, American Needle, Inc. v. Na-
tional Football League Co. et. al., No. 08-
661, 560 U.S. ___, slip op. (May, 24 2010),
available at http://www.supremecourt.gov/
opinions/09pdf/08-661.pdf.
2. Copperweld Corp. v. Independence Tube
Corp., 467 U.S. 752, 768-69 (1984).
3. American Needle, slip. op. at 9 (citing and
(continued from page 12)
14. Fall 2010 The Trade, Sports and Professional Associations Committee Newsletter 14
quoting Copperweld, 467 U.S. at 769, 771).
4. Id. at 11-12.
5. See, e.g., http://www.scotuswiki.com/
i n d e x . p h p ?
title=American_Needle_Inc._v._NFL (last
visited on Aug. 25, 2010).
6. See, e.g., American Needle, slip. op. at 18-20.
Another significant undercurrent is the sug-
gestion - inherent in the American Needle de-
cision’s favorable citation to older decisions
long thought dead by the antitrust bar - that
the Court has rejected the notion that corpora-
tions should be allowed the same freedom to
do through joint contracting activity what they
could otherwise do unilaterally, e.g., via
merger or firm expansion. See American Nee-
dle, slip. op. at 6-7 & n.4, 16-17 (citing and
discussing cases in which the Court had previ-
ously found that members of a single legal
entity were subject to scrutiny under Section 1
of the Sherman Act where the entity is con-
trolled by competitors and serves as a vehicle
for ongoing concerted activity, including the
cases of United States v. Sealy, 388 U.S. 350
(1967) and United States v. Topco Associates,
Inc., 405 U.S. 596 (1972)). In rejecting that
notion, the Court focused on the special anti-
competitive dangers inherent in joint actions,
particularly the risk of de facto or de jure car-
telization of the market. See American Nee-
dle, supra, slip. op. at 5-6 (citing and quoting
Copperweld, supra, 467 U.S. at 768-69), 17 &
n.7. The exploration of this undercurrent is
beyond the scope of this article.
7. Cf. State of California v. Safeway, Inc. et. al.,
No. 08-55671, slip. op. 11925, 11938, 11946
& n.3 (9th Cir. August 17, 2010) (discussing
and summarizing the ordinary quick look ap-
proach as determining whether “an observer
with even a rudimentary understanding of
economics could conclude that the restraint in
question would have an anti-competitive ef-
fect on customers and markets,” even if a par-
ticular circumstance may exist in which the
restraint may survive full rule of reason
inquiry, at which point “the burden shifts
to Defendants to show empirical evidence
of pro-competitive effects” (internal cita-
tions and quotation marks omitted)). The
Safeway case involved a challenge by the
State of California under per se and quick
look theories to a profit-pooling arrange-
ment among the three largest supermarket
chains in Southern California by which
those chains agreed to apportion any prof-
its above their historical share amongst
each other according to a formula as a tac-
tic to combat union strikes. Id. at 11935.
The profit-sharing agreement, which in-
cluded one affiliate chain not subject to
union activity, would last as long as any
strike or lock out plus two weeks. Id.
8. See American Needle, slip. op. at 18-19;
see also, e.g., Texaco Inc. v. Dagher, 547
U.S. 1, 6 (2006); Broadcast Music, Inc. v.
Columbia Broadcast System, Inc., 441 U.S.
1, 20-23 (1979).
9. See, e.g., ADV. COMM. NOTES FED. R. CIV.
P. 12(b)(6) (approving of court’s authority
to convert Rule 12(b)(6) motion to dismiss
to motion for summary judgment if a party
submits evidence extraneous to the com-
plaint as long as the court follows the pro-
cedures set out in FED. R. CIV. P. 56(f)).
10. See, e.g., FED. R. CIV. P. 56(f); ADV.
COMM. NOTES FED. R. CIV. P. 12(b)(6).
11. See, e.g., American Needle, supra, slip. op.
at 18-20.
12. See Bell Atlantic v. Twombly, 550 U.S.
544, 557-58 (2007) (referring to the need
to interpose additional pleading standards
as to claims of antitrust conspiracy involv-
ing parallel behavior in order to prevent
companies from having to undergo expen-
sive antitrust discovery in which judicial
supervision had only been “modestly suc-
cessful”); see also Weyerhaeuser Co. v.
Ross-Simmons Hardwood Lumber Co., 549
U.S. 312, 321 & n.7 (2007) (distinguishing
competitor lawsuits for predatory bidding
from upstream bidder lawsuits and down-
(continued from page 13)
15. Fall 2010 The Trade, Sports and Professional Associations Committee Newsletter 15
stream consumer lawsuits in finding that com-
petitor lawsuits for predatory bidding should
be subject to the same standard as predatory
pricing lawsuits). This article concerns itself
only with federal antitrust law under Section 1
of the Sherman Act and should not be inter-
preted as a reflection of the author’s views on
the construction and application of California
antitrust law or of Section 2 of the Sherman
Act regarding monopolies. In the first in-
stance, California antitrust law has a different
genesis, different statutory language, and a
different legislative history than federal anti-
trust law: all of which means that state courts
can and do deviate from federal antitrust law
in the construction and application of state
antitrust law. E.g., Antitrust and Unfair
Competition Law Section, THE STATE BAR OF
CALIFORNIA, CALIFORNIA STATE ANTITRUST
AND UNFAIR COMPETITION LAW, § 1.02[B] at
12-14 (2009); id. §1.05 at 24-27. While the
subject is thus beyond the scope of this article,
it is highly doubtful at first blush that a re-
verse quick look doctrine could be applied
under California antitrust law as that law
places on defendants the burden of demon-
strating a pro-competitive justification for a
restraint. See, e.g., id. §2.05[A] at 47-48. Nor
would this author advocate that such an analy-
sis be applied as to Section 2 of the Sherman
Act as that section reveals a specific Congres-
sional concern with the acquisition and main-
tenance of monopoly power that rightly places
the burden on monopolists to justify as pro-
competitive restraints or other conduct that is
otherwise anti-competitive and hence illegal.
See, e.g., American Needle, slip. op. at 5
(Congress singled out independent action in-
volving monopoly power, while leaving alone
other forms of independent actions, because
monopoly power is equally harmful whether
“it is the product of joint action or individual
action”); id. at 5 & n. 2 (noting the scrutiny of
independent actions that does “not threaten
monopolization” could deter “perfectly
competitive conduct” and force a judgment
on “almost every business decision”);
United States v. Microsoft, 253 F.3d 34, 59
(D.C. Cir. 2001) (if a plaintiff demonstrates
“a prima facie case under Section 2” by
“demonstrating anti-competitive effect,”
then a monopolist may proffer a pro-
competitive justification for its conduct. If
that justification is “non-pretextual,” i.e., it
involves “greater efficiency or enhanced
consumer appeal,” then “the burden shifts
back to the plaintiff to rebut that claim”).
13. 435 U.S. 679 (1985).
14. Id. at 690-93.
15. Standard Oil Co. v. United States, 221 U.S.
1 (1911).
16. Professional Engineers, 435 U.S. at 690.
17. Id. at 688-89 (discussing an antecedent
common law case, Mitchell v. Reynolds, 24
Eng. Rep. 37 (1711), upholding as reason-
able a covenant not to compete ancillary to
the sale of a business because it was for a
limited time and a limited geographical
area such that the long-run benefit of en-
hancing the marketability of the business
itself outweighed the temporary and lim-
ited loss of competition).
18. Id. at 692-93 (internal quotation marks and
citations omitted).
19. Id. at 693-94.
20. 468 U.S. 85 (1984).
21. Id. at 92-94.
22. Id. at 99.
23. Id. at 101-02 (listing examples of such
“restraints” as the rules of the game, the
size of the field, and the need for college
athletes to be non-paid).
24. Id. at 105-08.
25. Id. at 107-08.
26. Id. at 109 (internal quotation marks and
citations omitted).
27. Id. at 109 n.39.
28. Id. (citing and quoting Philip Areeda, The
Rule of Reason in General Antitrust Analy-
sis: General Issues 37-38 (Fed. Judicial
Center 1981).)
(continued from page 14)
16. Fall 2010 The Trade, Sports and Professional Associations Committee Newsletter 16
29. Id. at 113 (internal quotation marks and cita-
tions omitted).
30. Id. at 113-20.
31. 476 U.S. 447 (1986).
32. Id. at 449-52, 455.
33. Id. at 458-59.
34. Id. at 459 (internal quotation marks and cita-
tions omitted).
35. Id. at 460 (citing and quoting NCAA, 468 U.S.
at 109-10).
36. Id. at 461-62.
37. Id. at 459 (internal citations omitted).
38. Id.
39. 526 U.S. 756 (1999).
40. Id. at 762-65.
41. See id.
42. Id. at 770-71 (citing and discussing Profes-
sional Engineers, NCAA, and Indiana Federa-
tion of Dentists, supra).
43. Id. at 771.
44. Id. (internal citations and footnotes omitted);
see also id. at 772-75 (elaborating on these
points).
45. See id. at 771-75; see also id. at 778
(mentioning cases as well that supported this
point).
46. Id. at 778.
47. Id. at 779.
48. Id. at 778.
49. Id. at 779.
50. Id.
51. Id. at 780-81.
52. Id. at 780 n. 15. Plainly, the Court in this case
envisioned that the Court would conduct a
judicial inquiry not only into whether quick
look analysis would apply but also (if both
pro-competitive efficiencies and anti-
competitive were plausible) conduct a more
sedulous inquiry to determine if the “principal
tendency” of a restraint is pro-competitive or
anti-competitive. Id. at 781. Yet, nothing in
this case, or in the Court’s previous cases, ad-
dressed how the “principal tendency” of a re-
straint can be analyzed in the context of sum-
mary judgment on a more sedulous look
given that some assessments of fact at the
boundaries may be required. See, e.g.,
Anderson v. Liberty Lobby, 477 U.S. 242,
248-49 (1986) (summary judgment proce-
dure requires that credibility determina-
tions be eschewed and that there only be a
sufficient quantum of admissible evidence
to justify a jury verdict in order to demon-
strate a triable issue of material fact).
And, certainly, nothing in this case, or in
the Court’s previous decisions, suggested
that a full-blown rule of reason inquiry
would be a judicial one rather than one re-
served to the jury, a suggestion that cer-
tainly would raise Seventh Amendment
concerns (cf. Unitherm Food Systems v.
Swift-Eckrich, Inc., 546 U.S. 394, 402 n.4
(2006)) and go against the grain of prece-
dent stretching back before the enactment
of the Sherman Act. That being said, lim-
ited fact-finding by a court as part of a
summary judgment procedure is not un-
known to the law. See, e.g., Stuart v. Colo-
rado Interstate Gas Co., 271 F.3d 1221,
1225 (10th Cir. 2001) (noting that disputes
as to jurisdictional facts could be resolved
via evidentiary hearing on a converted mo-
tion for summary judgment). And, courts
do have the power, after hearing all of the
evidence presented by the first party, to
enter a directed verdict for the second party
where the evidence is legally insufficient
for a reasonable jury to find in favor of the
first party. Fed. R. Civ. P. 50(a); cf., e.g.,
Unitherm Food Systems, 546 U.S. at 402
n.4 (noting that Federal Rule of Civil Pro-
cedure 50(a) was drafted to avoid Seventh
Amendment concerns involving a plaintiff
having the right to have issues of fact be
decided by a jury); Anderson, 477 U.S. at
250-51 (a directed verdict can be granted
for a party even if there is a scintilla of evi-
dence supporting the other party as long as
no reasonable jury could find in favor of
the other party after hearing the evidence
and considering who carries the onus of
(continued from page 15)
17. Fall 2010 The Trade, Sports and Professional Associations Committee Newsletter 17
proof; a grant of a directed verdict is on the
same basis as a grant of a motion of summary
judgment except that it involves not just docu-
mentary evidence but admitted evidence such
as witness testimony). Thus, a court could,
after hearing all of the evidence on a con-
verted motion for summary judgment includ-
ing any in-court witness testimony, any depo-
sition testimony, or any consideration of
Daubert-type issues pertaining to proffered
expert testimony – see, e.g., Daubert v.
Merrell Dow Pharmaceuticals, Inc., 509 U.S.
579 (1993), decide that the “principal ten-
dency” of a restraint is pro-competitive or
anti-competitive where the evidence is such
that a reasonable jury could not decide other-
wise after due consideration of which party
carried the onus of proof as to those effects. If
the evidence presented by the parties indicated
that the question of a restraint’s pro-
competitive or anti-competitive effects were
close enough that a reasonable jury could go
either way, then it would be required to con-
duct a full-blown rule of reason analysis via a
jury trial: this process makes empirical sense
as close factual questions on the effects of a
restraint genuinely belong in the hands of the
community. The analysis of the dissent in Cal.
Dental Ass’n finding that a more sedulous
analysis of the restraint supported the lower
court’s opinion provides indirect support for
these conclusions. See Cal. Dental Assn., 526
U.S. at 782, 784-88 (dis. op.).
53. Cal. Dental Ass’n, 526 U.S. at 781.
54. Id. at 784-88 (dis. op.) (anti-competitive ef-
fects of the restraint are obvious; there is no
significant evidentiary support for the asser-
tion of pro-competitive efficiencies even
though the defendant association had every
reason to offer that evidence; and the facts as
found by the FTC provided sufficient support
for the conclusion that association could have
enough market power that its restraints would
likely have anti-competitive effects). In
Leegin Creative Leather Prods. Inc. v.
PSKS, Inc., 551 U.S. 887 (2007), the
United States Supreme Court encouraged
the lower courts to develop presumptions,
or rules for offering proof, to separate cir-
cumstances in which a vertical resale price
maintenance scheme would have an anti-
competitive effect from circumstances in
which it would have a pro-competitive ef-
fect. Id. at 898-99. Thus, although Leegin
by itself never addressed the application of
ordinary quick look, it still provides indi-
rect support at least to buttress the author-
ity of the federal courts to apply ordinary
quick look (or reverse quick look – a con-
cept discussed below) to separate anti-
competitive goats from pro-competitive
sheep.
55. American Needle v. NFL, 538 F.3d 736,
743 (7th Cir. 2008), rev’d on this ground
No. 08-661, 560 U.S. ___, slip op. (May,
24 2010), available at http://
w w w . s u p r e m e c o u r t . g o v /
opinions/09pdf/08-661.pdf.
56. Id. at 744.
57. Id. at 744.
58. American Needle v. NFL, No. 08-661,
Brief of the NFL Respondents at 9 (Jan.
21, 2008).
59. Id. at 11.
60. Id. at 12-13.
61. Id. at 13-14.
62. American Needle v. NFL, No. 08-661, Tr.
of Oral Argument at 4 (Jan. 13, 2010)
(transcript in possession of author).
63. Id. at 6.
64. Id. at 7.
65. Id. at 8.
66. Id. at 21.
67. Id. at 23.
68. Id. at 24.
69. Id.
70. American Needle, slip. op. at 19 (citing and
quoting NCAA, 468 U.S. at 109 n.39).
71. See Safeway, slip. op. at 11938, 11946,
11948-55, 11962 & n.3 (employing quick
look plus analysis by examining in general
(continued from page 16)
18. Fall 2010 The Trade, Sports and Professional Associations Committee Newsletter 18
profit-pooling arrangements, then refining
analysis to consider whether the particularities
of specific profit-pooling arrangement at issue
made any difference as to the otherwise gen-
eral assessment of the competitive effect of
profit-pooling arrangements, before then con-
sidering whether defendants had proffered any
empirical evidence of pro-competitive ef-
fects).
72. See id. at 11951-56. An example of this prin-
ciple would be the patent pool example dis-
cussed infra in the text. A patent pool lacking
certain attributes might no longer appear on its
face to be pro-competitive to an observer with
a rudimentary understanding of economics,
requiring a more sedulous look into the legal-
ity of the patent pool.
73. Cf. id. at 11948-56 (discussing the general
consensus regarding the anti-competitive ef-
fect of profit-sharing pools and then discuss-
ing how the particular circumstances of the
profit-sharing arrangement were not so differ-
ent as to warrant a different conclusion). In-
deed, in Safeway, slip. op. at 11959 n. 10, the
Ninth Circuit distinguished that case as in-
volving a profit-pooling arrangement in which
there is a long history of finding such arrange-
ments to be anti-competitive (a history that
was not tempered by the particular circum-
stances of the arrangement at issue as the
court found in that case) from the restrictions
imposed on price and quality advertising in
Cal. Dental Ass’n where specific circum-
stances surrounding the restrictions suggested
they may have a precompetitive effect or, at
worst, no competitive effect.
74. ADV. COMM. NOTES FED. R. CIV. P. 12(b)(6);
see, e.g., Crawford-El v. Britton, 523 U.S.
574, 579-600 (1998) (observing in circum-
stances involving civil rights suits by prison-
ers that, generally speaking, the discovery
process could be managed so as to lead to
early motions for summary adjudication or
judgment); Marshall Health Care Auth. v.
Shalala, 988 F.2d 1221, 1226 & nn. 5, 6
(D.C. Cir. 1993).
75. E.g., Celotex Corp. v. Catrett, 477 U.S.
317, 323-24 (1986); Anderson, 477 U.S. at
248-49.
76. E.g., Safeway, slip. op. at 11948, 11960; cf.
Marshall Health Care Auth., 988 F.2d at
1226-27 (early motion for summary judg-
ment appropriate as to validity of agency’s
action based on record because plaintiffs
not entitled to discovery or to trial to aug-
ment agency record).
77. Safeway, slip. op. at 11947-48.
78. See American Needle, slip. op. at 19 (“And,
depending upon the concerted activity in
question, the Rule of Reason may not re-
quire a detailed analysis, it can sometimes
be applied in the twinkling of an
eye.” (Internal citations and quotation
marks omitted.)).
79. Cf., e.g., Safeway, slip. op. at 11946 (“We
note that a confident conclusion does not
always prove ultimately correct. Rather, it
represents a tool of judicial economy de-
signed to save the litigants a considerable
investment of time and money which in the
balance is a benefit to all. That occasion-
ally we might be wrong is a price that it is
long established that society is willing to
pay. . . . Thus, a confident conclusion for
purposes of quick look and other limited
approaches means, at most, a reasonably
confident conclusion that, on some occa-
sions, may prove to be incorrect.”); id. at
11939 n. 3 (“Inherent in the summary na-
ture of quick look and per se analysis is the
possibility that a restraint that would sur-
vive a full rule of reason analysis in a par-
ticular case will nonetheless be invalidated.
. . .”).
80. E.g., Safeway, slip. op. at 11938 n.3, 11959
n.10, 11962. A more sedulous analysis of
a restraint under the rule of reason that is
nonetheless shy of a full-blown rule of rea-
son is not necessarily exempt from sum-
mary judgment: the issue of the existence
of a triable issue of material fact might be
(continued from page 17)
19. Fall 2010 The Trade, Sports and Professional Associations Committee Newsletter 19
resolved without any credibility determina-
tions or weighing of the strength of the evi-
dence, see Celotex, 477 U.S. at 323-24;
Anderson, 477 U.S. at 249, or the court might
be able to proceed on the basis of a stipulated
record, see, e.g., Appellant Opening Brief,
State of California et. al. v. Safeway, Inc., et.
al., No. 08-55671, 2008 WL 496770 (October
15, 2008). As previously noted, however, the
need to engage in some fact finding does not
necessarily preclude summary judgment as to
a restraint’s effects given Cal. Dental Ass’n if
the assessment of the evidence by the Court in
determining the “principal tendency” of a re-
straint would satisfy directed verdict stan-
dards.
81. See, e.g., Safeway, slip. op. at 11962.
82. See, e.g., id. at 11962-64 (analyzing evidence
proffered by defendants as to this point on a
stipulated record pursuant to a summary judg-
ment motion).
83. Cf., e.g., id. at 11957-58 (noting that the alter-
natives to ordinary quick look analysis are
proof of actual anti-competitive effects or
market power).
84. American Needle, slip. op. at 18-19 n. 10
(“This is not because a good intention will
save an otherwise objectionable regulation or
the reverse; but because knowledge of intent
may help the court to interpret facts and to
predict consequences”); see also, e.g., id. at
16 (“Agreements made within a firm can con-
stitute concerted action covered by §1 when
the parties to an agreement act on interests
separate from the firm itself and the intrafirm
agreements may simply be a formalistic shell
for ongoing concerted action.” (Internal foot-
note and citations omitted.)).
85. E.g., Safeway, slip. op. at 11943 n.4.
86. See, e.g., Twombly, 550 U.S. at 557-58; Safe-
way, slip. op. at 11938.
87. For example, the federal grand jury investiga-
tion into the price-fixing cartel in the Dynamic
Random Access Memory (“DRAM”) market
appears to have been triggered by 2002
public statements by the CEO for Dell, a
purchaser of DRAM chips for use in its
computers and servers, that recently ob-
served price increases in DRAM could
only be explained if there were a price-
fixing cartel in operation. E.g., Michael
Kanelios, CNET News, Dell trying to side-
step “cartel” (Apr. 30, 2002), available at
http://news.cnet.com/2100-1040-
895938.html.
88. See, e.g., Safeway, slip. op. at 11952-53 &
nn. 6, 7 (relying in its quick look plus
analysis on undisputed facts, and publicly-
available information, as to the nature of
the market and the defendants’ market
shares therein in determining if the defen-
dants have market power for purposes of
assessing whether the obvious anti-
competitive effects of a profit-pooling ar-
rangement hold under the specific circum-
stances of that case). In Safeway, the par-
ties stipulated to a dismissal of the case
following denials of cross-motions for
summary judgment - and to the specific
record that was before the district court
regarding those denials of the cross-
motions for summary judgment. See, e.g.,
Appellant Opening Brief, State of Califor-
nia et. al. v. Safeway, Inc., et. al., No. 08-
55671, 2008 WL 496770 (October 15,
2008).
89. See id. at 11938, 11952-53.
90. See id. at 11958 (quoting PHILIP AREEDA
AND HERBERT HOVENKAMP, ANTITRUST
LAW, §1901d at 188-89 (3d. ed. 1996)).
91. See, e.g., Fed. R. Civ. P. 56(f). The courts
may be able to tailor discovery to the cir-
cumstances raised by plaintiffs as differen-
tiating the restraint at issue from one that
would warrant exculpation under a reverse
quick look analysis such that the discovery
ordered may amount to something less than
costly, full-blown discovery. This would
still allow for an earlier summary judgment
motion – or at least an earlier motion for
summary adjudication to narrow issues –
(continued from page 18)
20. Fall 2010 The Trade, Sports and Professional Associations Committee Newsletter 20
than would a summary judgment motion that
falls on the heels of full-blown discovery. Cf.,
Crawford-El, 523 U.S. at 579-600.
92. See, e.g., Broadcast Music, 441 U.S. at 20
(association’s offering of blanket copyright
license for millions of music compositions
enables association to offer product of benefit
to consumers as individual performance by
performance transactions would be expen-
sive); id. at 22-23 (blanket license is equiva-
lent to new product and is quite different from
what would be offered individually); id. at 24-
25 (noting that, while such a license may be
subject to attack under a fuller rule of reason
analysis, it should not be summarily struck
down as being “automatically illegal”).
93. See, e.g., Dagher, 547 U.S. at 5 (“As a single
entity, a joint venture, like any other firm,
must have the discretion to determine the
prices of the products that it sells, including
the discretion to sell two brands at a single
price.”).
94. See, e.g., American Needle, slip op. at 18-19;
NCAA, 468 U.S at 101-02.
95. E.g., U.S. Dept. of Justice & FTC, Antitrust
Guidelines for the Licensing of Intellectual
Property, §5.5 (1995); see U.S. Dept. of Jus-
tice & FTC, Antitrust Guidelines for Collabo-
rations among Competitors, Agreements Chal-
lenged as Per Se Illegal, §3.2 (competitor col-
laborations, such as patent pools, are analyzed
under the rule of reason if they are
“participants in an efficiency-enhancing inte-
gration of economic activity,” and if they en-
ter into an agreement, i.e., on price, which is
“reasonably related to the integration and rea-
sonably necessary to achieve [these] pro-
competitive benefits.” These guidelines fur-
ther note that “[p]articipants in an efficiency-
enhancing integration typically combine, by
contract or otherwise, significant capital, tech-
nology, or other complementary assets to
achieve pro-competitive benefits that the par-
ticipants could not achieve separately.”).
96. American Needle, slip. op. at 19 (citing and
quoting NCAA, 468 U.S. at 109 n.39); see
also Cal Dental Ass’n, 526 U.S. at 770-71.
97. Cf. Cal. Dental Ass’n, 526 U.S. at 780-81;
Safeway, slip. op. at 11948-56.
98. E.g., Antitrust Guidelines for the Licensing
of Intellectual Property, supra, §5.5; U.S.
Dept. of Justice, Business Review Ltr. to
MPEG-LA (June 26, 1997) at 6-7 [§II(A)
(1)-(3)], available at http://
www.usdoj.gov/atr/public/ busre-
view/1170.htm; compare, e.g., United
States v. Glaxo Group, Ltd. , 410 U.S. 52,
54-55, 58-59, 60-64 (1973) (parties formed
patent pools involving two competing pat-
ents for alternate modes of manufacturing a
drug, and imposed restrictions on sub-
licensees preventing bulk manufacturing of
the drug; government successfully attacked
patent pool as a section 1 violation without
challenging patent; High Court on appeal
agreed with government that, to restore
competition, court could require patent
holders who formed a patent pool to fix
prices to license out their patents at reason-
able royalty rate); Zenith Radio Corp. v.
Hazeltine Research, Inc., 395 U.S. 100,
139-140 (1969) (Section 1 violation oc-
curred when defendant-company conspired
with foreign patent pool involving televi-
sions to prevent export of American-made
televisions to Canada by refusing to license
patents for American-made televisions to
be imported into Canada; court also af-
firmed striking down of policy by defen-
dant-company that licensees had to pay a
percentage of total sales as royalty for their
use of the patent, regardless of their actual
use of the patent, as that could require the
payment of royalties on products in which
a competing patent is used or on products
in which no patent is used at all); United
States v. United States Gypsum, 333 U.S.
364, 370-389 (1948) (patent pool that used
patent licenses as part of its efforts to fix
prices on certain products, even those not
covered by the patents, and discontinue
(continued from page 19)
21. Fall 2010 The Trade, Sports and Professional Associations Committee Newsletter 21
competing products, could have the validity of
its patents be attacked by the government
since the licensing arrangements would vio-
late Section 1 if the patents were invalid); id.
at 396-397 (inference could be drawn from
evidence that manufacturers of unpatented
competing product also had to pay patent li-
cense fees that members of patent pool had
reached agreement to cease production of al-
ternative unpatented product; said agreement
is an illegal extension of the patent monopoly
and, as such, is invalid); Vulcan Powder Co.
v. Hercules Powder Co., 96 Cal. 510, 512-17
(1892) (defendants could not justify otherwise
illegal territorial allocation and profit pool on
the ground that two of the parties had patents
for dynamite as other parties did not have any
patents and unpatented dynamite was covered
by the pool).
99. Compare, e.g., Cal. Dental Ass’n, 526 U.S. at
778-79.
100.See Cal. Dental Ass’n, 527 U.S. at 793-94
(dis. op.).
101.See, e.g., PSKS, Inc. v. Leegin Creative
Leather Prods., Inc., No. 09-40506, 2010 WL
3220384 at *4, 6 & nn. 4, 5 (5th Cir. Aug. 17,
2010) (erroneously implying that one can not
use quick look, or point to actual, observed
anti-competitive effects, without first defining
a relevant market and showing that the defen-
dant has market power).
102.See e.g., American Needle, supra, Tr. of Oral
Argument at 6, 21.
103.Compare, e.g., Professional Engineers, 435
U.S. at 688-89 (discussing an antecedent com-
mon law case, Mitchell v. Reynolds, 24 Eng.
Rep. 37 (1711) upholding as reasonable a lim-
ited covenant not to compete ancillary to the
sale of a business); Safeway, supra, slip. op.
at 11948-49 n.5 (discussing with approval an
antecedent common law case, Anderson v.
Jett, 12 S.W. 670, 671 (Ky. 1889), that ex-
plained why profit pools have an anti-
competitive effect).
Reconciling team rivalry, essential to the
magic of organized sports, with antitrust
principles governing economic competition
has long perplexed the courts. On the one
hand, no one disputes that competitive
league sports require a high degree of coor-
dination to supply a product that appeals to
consumers. On the other hand, it is the
very fact of intense team competition that
is at the heart of that appeal. Whether, in
merchandising, teams are independently
competitive actors or entities “[pursuing]
the common interests of the whole”1
was
the issue before the Court in American
Needle v. National Football League, __
U.S. __, 130 S.Ct. 2201 (2010). Unfortu-
nately, the Court’s opinion does not con-
front or address the unique branding uses
present in spectator sports.
Professional sports leagues require a high
degree of coordinated activity to compete
and to provide their customers with a
meaningful product. Prior to the Supreme
Court’s recent decision in American Nee-
dle, many would have agreed that the
member teams of the NFL possessed a suf-
ficient unity of interest in the production of
its product to exempt certain collective ar-
rangements from scrutiny under Section 1
of the Sherman Act. American Needle nar-
rowed the issue to ask whether such a
shared unity of interest existed with respect
to the member teams' decision to license
(continued from page 20) THERE IS ONLY ONE NATIONAL
FOOTBALL LEAGUE
AMERICAN NEEDLE AND THE
EXPLOITATION OF BRAND
CAROLE E. HANDLER AND
JOHN SHAEFFER*
22. Fall 2010 The Trade, Sports and Professional Associations Committee Newsletter 22
their respective brands and logos jointly
through National Football League Properties
(“NFLP”), a company they created and owned
for that purpose.
While the American Needle Court acknowl-
edged the necessity for member teams to co-
operate in the production of football, it de-
clined to hold that member teams have a suffi-
cient unity of interest with respect to any as-
pect of their product sufficient to avoid Sec-
tion 1 scrutiny. Instead, the Court opted for a
liberal Rule of Reason approach, citing evi-
dence of “necessity” as a justification relevant
to whether an arrangement is an unreasonable
restraint, not whether there exists a “unity of
interest” sufficient to foreclose any Section 1
consideration at all. With respect to the key
issue before it - merchandising of each team’s
distinct and unique trademarks - the Court
held that the teams were “‘separate economic
actors pursuing separate economic interests’ .
. . such that the agreement [to exclusive li-
cense the merchandising of headgear bearing
team marks] ‘deprived the marketplace of in-
dependent centers of decision making.’”2
In
sum, Copperweld’s “common interest” immu-
nity would not apply.
This article considers whether the American
Needle decision should have found branded
team licensing interdependent rather than in-
dependent in the sports league context. First,
a merchandising license for a particular team
is arguably not a substitute for a blanket mer-
chandising license for all of the teams. Be-
cause no team can offer a blanket license for
use of all teams’ trademarks and logos, the
agreement to offer blanket licenses has not
deprived the market of competition among
meaningful independent decision makers
with respect to the blanket product.3
Sec-
ond, and unlike competing forms of
branded entertainment, competitive sports
leagues’ internal brands are interrelated—
injury to one affects all. Oddly, these
unique characteristics of sports brands
were not raised with, or considered by, the
Court in deciding whether the NFPL’s mer-
chandising decision was a collective or uni-
lateral act.
Whether these factors would have caused
the Court to find a sufficient unity of inter-
est to exclude this arrangement from Sec-
tion 1 is highly debatable. Citing Copper-
weld, the American Needle decision refer-
ences “a complete unity of interest” be-
tween distinct legal entities as rendering
them “incapable of conspiring under § 1.”4
But how “complete” must “complete” be?
At a minimum, the interdependence of a
team’s brand with the league and among
other members of the league provides am-
ple justification for coordinating efforts to
exploit the various brands. Thus, brand
protection is an interest that may well jus-
tify a collective decision under an ex-
tremely deferential Rule of Reason analysis
under Section 1 even though that decision
may not be immune from any scrutiny un-
der Section 1.
The Nature of the Market
Spectator sports are a unique consumer
product precisely because competition is
the product they sell to customers. The
moment consumers perceive a lack of com-
petitive drama, their interest wanes and the
business suffers. While without question
teams within a league want to achieve a
competitive advantage against each other,
(continued from page 21)
23. Fall 2010 The Trade, Sports and Professional Associations Committee Newsletter 23
leagues as a whole recognize that only by en-
suring competitiveness within a league can
they retain customer interest (for example,
salary caps and revenue sharing are accepted
ways of achieving that goal), and the need for
such cooperation to achieve a viable spectator
sports product has been unquestioned. Argua-
bly, however, this interdependence transcends
the playing field and extends to all facets of
the consumers’ interest in their team and in
the league itself.
Spectator sports compete with other forms of
entertainment and, like entertainment gener-
ally, their popularity is dependent on con-
sumer preferences and tastes. There is no ob-
jectively meaningful way to compare the
NFL’s consumer offering with the National
Basketball League, the New York City Ballet,
a U2 concert, a Rembrandt exhibition, or the
latest episode of Glee. Distinguishing the
value of these leisure diversions is simply per-
sonal preference, i.e., taste.
But spectator sports are distinguished from
competing forms of entertainment in at least
two significant ways. First, fan loyalty is par-
ticularly strong in sports and in particular
sports merchandising - just try to sell Minne-
sota Viking merchandise to a Green Bay
Packers Fan. Second, more so than in almost
any other business, injury to the brand of one
member of the league impacts not only the
league’s brand but the brand of each member
of the league. By comparison, misfortune be-
falling a rock band should not impact the
value of U2’s brand among their fans. In this
way the brand value of spectator sports is
similar to an entity offering a variety of simi-
lar consumer goods. Toyota’s brand and all
of its sub-brands unquestionably suffered
from the sudden acceleration issues associ-
ated with only a few of its sub-brands even
though no similar problems were identified
with most of its brands.5
In the same way,
the NBA faced a significant challenge to its
brand and its members’ brands resulting
from a 2004 brawl in the closing minutes
of a game involving only a few members of
the Indiana Pacers and the Detroit Pistons.
Brand interdependence arguably is one rea-
son sports leagues can proffer themselves
as a single economic entity competing for
the consumer’s desire for entertainment
whose teams are incapable of competing
against each other in a meaningful manner
beyond the field of play. And the fact of
brand interdependence suggests that a blan-
ket trademark license to all of the NFL
brands does not deprive the marketplace of
relevant independent centers of decision
making.
The Case as Presented to the Supreme
Court
A brief review of the facts present to the
American Needle Court is helpful. The
NFL was formed in 1920 as an unincorpo-
rated association of its separate member
teams and operates pursuant to an agreed to
constitution and bylaws.6
In 1963, the
member teams formed NFLP, which made
possible the sale of blanket licenses cover-
ing all of the teams. From 1963 until 2000,
NFLP typically sold such blanket licenses
to competing manufacturers for a variety of
merchandise, and the members shared the
revenues derived from this merchandising.
In 2000, the member voted to empower
NFLP to enter exclusive licenses,7
and in
2001, NFLP granted a 10 year exclusive
license to Reebok International, Ltd. for,
(continued from page (22)
24. Fall 2010 The Trade, Sports and Professional Associations Committee Newsletter 24
among other things, caps and headgear for all
32 member teams.8
Pursuant to Article V,
Section 6 of the NFL Constitution, the af-
firmative vote of three-quarters of the teams
was required to approve this arrangement with
Reebok.9
Significantly, the Dallas Cowboys
exercised its contractual right under the Ree-
bok agreement to opt out of this exclusive re-
lationship in exchange for the Cowboys’
agreement to share a portion of the revenues it
derives from its independent license with the
31 other teams.
For decades prior to 2001, American Needle
was among the manufacturers with a blanket
license to produce headwear bearing all 32
member teams’ brands.10
As a result of the
exclusive agreement with Reebok, American
Needle lost its license with NFLP, and Ameri-
can Needle sued the NFL, NFLP, each of the
member teams and Reebok for violations of
the Sherman Act.11
Nothing in the record in-
dicates that American Needle sought an indi-
vidual license from any team after losing its
blanket license. The district court dismissed
American Needle’s claim for a per se viola-
tion of Section 1. Thereafter, the district court
granted defendants’ motion for summary
judgment finding that the NFL and its 32
teams should be deemed a single entity im-
mune from Section 1 liability for their coop-
erative conduct and that the teams’ single-
entity status effectively defeated the monopo-
lization claim. The Seventh Circuit affirmed,
concluding “that only one source of economic
power controls the promotion of football.”
538 F.3d 736, 743 (2008).
In seeking certiorari, American Needle did not
dispute that certain aspects of the NFL busi-
ness should be immune from Section 1
scrutiny. American Needle similarly did
not challenge the member’s agreement to
make available blanket licenses through
NFLP covering the trademarks and logos
of all the teams. Instead, American Needle
challenged the member teams’ agreement
authorizing NFLP to enter an exclusive
blanket license with Reebok for the sale of
headgear bearing the brands and logos of
the various teams and argued that it should
not be immune from Section 1 attack.
After certiorari was granted, the NFL Re-
spondents filed their brief, characterizing
the questioned merchandising contract as
“promotional”. The NFL Respondents
identified the question to be decided as
“[w]hether . . . a professional sports league
and its separately owned member clubs,
which exist to produce collectively an en-
tertainment product that no member could
produce on its own, function as a single
entity for Section 1 purposes in promoting
that product.”12
They argued that [b]ecause
the NFL and its member clubs function as
one source of economic power when col-
lectively producing NFL Football, they
also function as a single economic entity in
promoting that products.” Limiting their
argument to the promotional function of
merchandising, the NFL Respondents ar-
gued that so long as merchandising served
a promotional function, whether promotion
was the sole or overriding purpose “ha[d]
no practical antitrust significance.”13
This limitation was fatal to the NFL’s posi-
tion, as it presumed a linkage between pro-
duction, promotion and merchandising
while failing to confront the American Nee-
dle Court’s concern – whether the agree-
ment itself to collectively license all team
(continued from page 23)
25. Fall 2010 The Trade, Sports and Professional Associations Committee Newsletter 25
brands on an exclusive basis meaningfully
deprived the market of independent decision
makers. Acknowledging that two elements
make up a § 1 claim - (1) “whether an ar-
rangement is a contract, combination or con-
spiracy;” and (2) “whether [that arrangement]
unreasonably restrains trade” - the Court iden-
tified the first element as the only one at is-
sue.14
Consistent with the principles articu-
lated in Copperweld, no one disputed that “[t]
he key [to answering this question] is whether
the alleged ‘contract, combination . . . . , or
conspiracy’ is concerted action – that is,
whether it joins together separate decision
makers.”15
The question was “whether there
is a ‘contract, combination . . . or conspiracy’
among ‘separate economic actors pursuing
separate economic interests,’ . . . such that the
agreement ‘deprives the marketplace of inde-
pendent centers of decision making’ . . . and
therefore of ‘diversity of entrepreneurial inter-
ests.’”16
“Because the inquiry is one of com-
petitive reality,” the Court continued that “it is
not determinative that the [member teams] . . .
are legally distinct entities” nor was it deter-
minative that they “organized themselves [for
the exploitation of their intellectual property]
under a single umbrella or into a structured
joint venture”, like NFLP.17
The Court agreed with the NFL that “teams
share an interest in making the entire league
successful and profitable, and that they must
cooperate in the production and scheduling of
games.”18
But the Court rejected the NFL’s
efforts to link the necessity of cooperation
with the unity of interest necessary to exclude
an arrangement from Section 1 considera-
tion.19
Instead, the Court stated that the fac-
tors demonstrating the necessity for coopera-
tion among member teams “provide[] a
perfectly sensible justification for making a
host of collective decisions”20
but
“justification[s] for cooperation is not rele-
vant to whether the cooperation is con-
certed or independent action.”21
And the
decision went on to say that the “necessity
of cooperation is a factor relevant to
whether the agreement is subject to the
Rule of Reason.”22
“’A contract, combina-
tion . . . or conspiracy’” . . . “that is neces-
sary [is not immune from § 1 scrutiny] if it
‘deprives the marketplace of independent
centers of decision making.”23
The Court refused to find any element of
the production of NFL football necessarily
immune from Section 1 scrutiny, which
doomed the efforts of NFL Respondents to
apply immunity to merchandising as a pro-
motional activity.24
Because the NFL Re-
spondents had provided no justification
that the promotion of football should be
immunized conduct other than its interde-
pendence with the production of football,
the Court could cite to the lack of a unity of
interest with respect to aspects of the
NFL’s business as support for the absence
of an specific unity of interest with respect
to merchandising.
The Court broadly concluded that “[t]he
NFL teams do not possess either the uni-
tary decision-making quality or single ag-
gregation of economic power characteristic
of independent action.”25
Unfortunately,
the American Needle opinion provides little
explication of how member teams are
“independent centers of decision-making”
in a manner relevant to the antitrust laws.
The only cited support for this sweeping
statement is that “[t]he teams compete with
one another, not only on the playing field,
(continued from page 24)
26. Fall 2010 The Trade, Sports and Professional Associations Committee Newsletter 26
but to attract fans, for gate receipts and for
contracts with managerial and playing person-
nel.”26
But with respect to gate receipts and
fans, do the Chicago Bears meaningfully com-
pete for fans and gate receipts with the San
Diego Chargers? Is not the viability of both
teams relevant in an antitrust sense to the
League’s competitiveness with other forms of
entertainment? And is the competition for
managerial and player personnel always
meaningfully different than competition
among subsidiary corporations for star em-
ployees?27
Moreover, while there is prece-
dent for finding concerted activity among
league members in the labor arena, the fact
that league members can act as meaningful
independent decision makers with respect to
one agreement - e.g., labor contacts - does not
necessarily mean that they are meaningful in-
dependent decision makers in all instances. In
American Needle, the Court correctly recog-
nized that each alleged collusive activity must
be judged separately with respect to its ability
to violate Section 1.28
Applying these principles, the Court con-
cluded that the member teams’ decision to
enter the exclusive headwear agreement was
not unitary because “the teams compete in the
market for intellectual property.”29
But the
opinion simply did not consider whether the
league members’ trademarks are meaningful
substitutes for one another or whether their
successes are complementary within the
whole. The Court’s conclusion of a potential
impact on competition rests on a single sen-
tence only: “To a firm making hats, the
Saints and the Colts are two potentially com-
peting suppliers of valuable trademarks.”30
Whether the Court identified relevant poten-
tial competition and what it might be is up
for debate. Can it be said that the licensing
right to the Colts trademark competes with
the Saints’ trademark in New Orleans any
more than the New York Yankees’ mark or
rights to Paris Hilton’s image compete with
the Saints for licenses on cap in that same
market?31
The Unique Aspects of the
Blanket License
Significantly, the product that American
Needle sought, and was denied as the result
of the exclusive agreement with Reebok,
was not a license to logo of any particular
team, but a blanket license to the trade-
marks of all of the teams, a unique product
that no single team could grant. NFLP
alone could offer a blanket license to all of
the teams’ trademarks and logos. Since no
one member team could offer a blanket li-
cense to all of the teams’ marks, the joint
conduct of the teams necessary to offer the
blanket license simply “does not ‘deprive
the marketplace of independent centers of
decision-making.’”32
Nothing in the re-
cord indicates that an independent license
agreement with one or more member teams
is a meaningful substitute; if it were, one
would expect other manufactures who lost
their blanket licenses following entry of the
Reebok agreement to purse independent
licenses with separate teams. In fact, there
is a real question about whether American
Needle even made a claim of antitrust in-
jury resulting from the horizontal agree-
ment to license team brands collectively.
As the United States pointed out in its
amicus brief, American Needle’s “asserted
injury appears to flow not from any anti-
competitive effect of the teams’ agreement
to market their intellectual property collec-
(continued from page 25)
27. Fall 2010 The Trade, Sports and Professional Associations Committee Newsletter 27
tively, but only from a subsequent and inde-
pendent decision to contract with a single li-
censee, other than American Needle.”33
The Court’s opinion is silent on the common
interest shared by member teams in the mar-
keting of the unique product at issue – a blan-
ket license to all of brands. Offering a blanket
license to a manufacturer enables a manufac-
turer to include in its distribution of many
Colts branded products to Indianapolis a few
products branded with other member marks
for the narrower group of expected fans of
other teams in that area. Additionally, a co-
operative effort in merchandizing the brands
collectively recognizes the interdependence of
each team’s brand and the unity of interest in
maintaining the value of each of the brands to
the entire league. While, broadly stated, the
Saints’ mark competes for licensing revenues
with Paris Hilton, an irrational merchandising
decision by Ms. Hilton would not have any
impact on the Saints’ brand. By contrast, a
similar irrational marketing decision by a
league team, such as branding condoms with
the team’s logo, could easily bring ridicule to
the league as a whole and adversely impact
the value of each team’s brand. It is this inter-
dependence of team brands within a league
that makes the unity of interest in the market-
ing of the separate league brands far greater
and different than the pro-competitive ration-
ale for coordinated licensing endorsed by the
Supreme Court in Broadcast Music, Inc. v.
CBS, 441 U.S. 1 (1979). In BMI, the Court
recognized the competitive value to a single
licensing source for music, but did not iden-
tify any other common interest shared by the
diverse music owners furthered by the rela-
tionship.
The Supreme Court in American Needle
can be seen as a narrowing the unity of in-
terest doctrine it articulated in Copper-
weld.34
While some earlier Court decisions
as well as Copperweld’s lower court prog-
eny support that some divergent economic
interest will not necessarily transmute uni-
tary conduct into concerted activity subject
to § 1,35
American Needle can be read as
taking literally Copperweld’s mention of a
“complete unity of interest.” But, although
it rejected Section 1 immunity, the Ameri-
can Needle Court is not completely unsym-
pathetic to the necessity for concerted ac-
tion in spectator sports. The opinion does
its best not to engender fear that concerted
activity necessary to create a market or for
a product to compete will be found to vio-
late Section 1. Instead of allowing a uni-
tary interest to be found sufficient to re-
move necessary conduct from antitrust
scrutiny despite some divergence of eco-
nomic interest among the parties, the
American Needle Court suggests that a uni-
tary interest demonstrated by evidence sup-
porting the necessity of coordinated activ-
ity should be considered as a justification
for the concerted action under a Rule of
Reason analysis.36
Indeed, the Court hints
in dicta that there are instances where the
divergent economic interest is so trifling
that review should be nothing more than a
“'twinkling of the eye.’”37
Conclusion
For good reason, professional sports
leagues do not want the cooperation among
their members that is necessary to offer a
product that can compete with other forms
of entertainment for the consumer’s eye-
balls to be subject to any Section 1 review,
(continued from page 26)
28. Fall 2010 The Trade, Sports and Professional Associations Committee Newsletter 28
regardless of how fleeting.38
It is not difficult
to understand why professional sports believe
that their profitability is uniquely the result of
team interdependence in a manner simply not
shared by other forms of entertainment. The
leagues rightfully argue that they are different
than other forms of entertainment because
their product is dependent upon the coopera-
tion of what their consumers view as inde-
pendently competitive teams. Subjecting pro-
fessional sports' necessary coordinated activ-
ity to any antitrust scrutiny arguably puts pro-
fessional sports at a competitive disadvantage
against entertainment not similarly predicated
on cooperative competition. While the Ameri-
can Needle opinion attempts to appease pro-
fessional sports by hinting at an extremely
deferential review for the necessary element
of cooperation, the decision itself notes that
the law “treats concerted behavior more
strictly than unilateral behavior.”39
It is unfor-
tunate that issues of brand interdependence
and meaningful distinction between a license
to any one member’s brand compared with a
blanket license to all the leagues’ brands was
not presented to the Court for consideration.
While it is far from certain whether brand
analysis would have pushed the Court into
finding such joint licensing not to be an ar-
rangement subject to Section 1 merited scru-
tiny, a focus on branding provides evidence
that NFLP’s exclusive blanket license agree-
ment did not deprive the marketplace of inde-
pendent enters of decision making and as
such, could not adversely impact actual or po-
tential competition.
END NOTES:
• Carole E. Handler and John Shaeffer
both practice antitrust and intellectual
property law at the Los Angeles office of
Lathrop and Gage, where John is the man-
aging partner. Their practices
have focused on the entertainment, sports,
and media industries, energy, and antitrust
issues arising from the exploitation of in-
tellectual property They have each au-
thored numerous articles on antitrust sub-
jects such as net neutrality, antitrust in the
entertainment industry, the Noerr-
Pennington defense, the pass-on defense,
standard setting, equitable disgorge-
ment, and reverse payments. Carole is an
adjunct professor of antitrust law at USC's
Gould School of law, where she teaches
antitrust, intellectual property/antitrust, and
copyright law, and John teaches entertain-
ment and media law at Santa Clara Law
School.
1. Copperweld Corp. v. Independence Tube
Corp., 467 U.S. 752, 771 (1984).
2. American Needle, 130 S.Ct. at 2212.
3. See Major League Baseball Properties,
Inc. v. Salvino, 542 F.2d 290, 323 (2d. Cir.
2008) (“MLBP can offer a license that cov-
ers all of the intellectual property of all the
MLB clubs; no one Club could offer such a
license, for no Club has the right to license
the intellectual property of any other.”)
4. American Needle, 130 S.Ct. at 2211
5. As Judge Easterbrook noted in Chicago
Professional Sports Ltd. Partnership v.
NBA, 95 F.3d 593 (1996), “From the per-
spective of fans and advertiser (who use
sports telecasts to reach fans), ‘NBA Bas-
ketball’ is one product from a single source
even though the Chicago Bulls and the Se-
attle Supersonics are highly distinguish-
able, just as General Motors is a single firm
even though a Corvette differs from a
Chevrolet.” Id. at 599.
6. The Constitution and Bylaws of the NFL
effective as of February 1, 1970 (2006
Rev.) (“NFL Constitution)” is available at
http://static.nfl.com/static/content//public/
static/html/careers/pdf/co_.pdf.
(continued from page 27)
29. Fall 2010 The Trade, Sports and Professional Associations Committee Newsletter 29
7. See 2000 Resolution G-10 to the NFL Consti-
tution at 2000-6.
8. See 2001 Resolution JC-3 to the NFL Consti-
tution at 2001-14.
9. NFL Constitution at 21.
10. Similar blanket licenses covering all team
brands within a professional sports league are
available from entities similar to NFLP in
other sports. See Major League Baseball
Properties, Inc. v. Salvino, Inc., 542 F.3d 290,
299 (2d Cir. 2008). This case references that
blanket licenses for use of all team brands are
available from Major League Properties, Inc.
(“MLBP”), NFLP and National Hockey
League Enterprises, L.P.
11. According to American Needle, following this
exclusive relationship with Reebok, the price
of branded headwear generally jumped from
$19.99 to $29.99. Brief of Petitioner at 7;
American Needle, Inc. v. National Football
League; available at http://www.abanet.org/
publiced/preview/briefs/pdfs/07-08/08-
661_Petitioner.pdf.
12. See Brief for the NFL Respondents, at (i),
American Needle, Inc. v. National Football
League; available at http://www.abanet.org/
publiced/preview/briefs/pdfs/09-10/08-
661_RespondentNFL.pdf.
13. Id. at 27 n.8.
14. American Needle, 130 S.Ct. at 2206.
15. Id. at 2212.
16. Id.
17. Id. Some confusion persists with respect to
the relevance of the Court’s opinion in Texaco
v. Dagher, 547 U.S. 1 (2006). In Texaco, the
Court found that the agreement of Texaco and
Shell to pool their refining operations and sell
under their respective Texaco and Shell
brands gasoline at the same price was more
akin to a joint venture than a cartel. The
Court reversed the Ninth Circuit’s decision
holding that “respondents’ anti-trust claim
cannot prevail” “[b]ecause the pricing deci-
sion of a legitimate joint venture do not fall
within the narrow category of activity that
is per se unlawful under § 1 of the
Sherman Act.” Id. at 8. Since the respon-
dents did not put forward a Rule of Reason
claim, the Court did not address whether
the arrangement would run afoul of the
Rule of Reason. Id. at 7 n. 2. No one dis-
puted in American Needle, that if the ex-
clusive arrangement with Reebok was sub-
ject to § 1 review, that review would be
under a Rule of Reason analysis.
18. American Needle, 130 S.Ct.. at 2216.
19. It is interesting that MLBP apparently did
not seek Section 1 immunity pursuant to
Copperweld when it faced a similar situa-
tion in MLBP. v. Salvino, Inc., 542 F.3d
299 (2d Cir. 2008). In that case a licensor
of plush toys, who previously had a blanket
license from MLBP, claimed that MLBP
exclusive right to license MLB team
brands, with certain limitations, violated
Section 1 when MLBP sought to block the
licensor’s ability to sell certain products
bearing the Arizona Diamondback logo.
Id. at 295. On appeal, the Second Circuit
affirmed the district court’s decision to ap-
ply a Rule of Reason analysis rather than
hold the arrangement a per se violation or
subject to a quick-look rule. Id. at 334.
20. Id. at 2216.
21. Id. at 2214.
22. Id. at 2214 n.6.
23. Id. at 2214 (quoting Copperweld 467 U.S.
at 769).
24. Id. at at 2214 n. 7.
25. Id. at 2212.
26. Id.
27. In Brown v. Pro Football, Inc., 518 U.S.
231 (1996), the Court hinted that in certain
employment contexts the NFL might be
considered more like a single bargaining
employer than a collection of distinct enti-
ties.. “We concede that the clubs that make
up a professional sports league are not
completely independent economic com-
petitors, as they depend upon a degree of
cooperation for economic survival. . . . . In
(continued from page 28)