Reprinted with permission from the July 9, 2024 edition of The Legal Intelligencer. © 2024 ALM Global Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-256-2472 or asset-and-logo-licensing@alm.com.
On June 27, 2024, a jury in the United States District Court for the Central District of California rendered a multibillion-dollar verdict in favor of restaurant/bar owners and individual customers and against the National Football League (NFL), related to the NFL’s Sunday Ticket.[1] Sunday Ticket is a product offered by the NFL, beginning in 1994 and distributed exclusively through its broadcast partner DirectTV, wherein a bundle of games are offered nationwide, targeted to out-of-market fans interested in watching games of their home teams and to restaurants/bars seeking to offer this option to local fans. As pleaded by the plaintiffs in this lawsuit, the package of games “could be sold nationwide, allowing the NFL and its Teams to offer a single, monopolized product containing the various products they would otherwise sell individually.”
Before we get to what the NFL Sunday Ticket decision means if it withstands the plethora of post-trial motions and appeals that are anticipated to follow, let’s look at how the NFL got here. Professional sports leagues have been under scrutiny for their actions under sections 1 and 2 of the Sherman Antitrust Act for well over a century. The first major sport to tackle this issue was baseball, with SCOTUS unanimously ruling that Major League Baseball (MLB) was exempt from the Sherman Act more than a century ago.[2] Interestingly, when it comes to baseball, affectionately and historically referred to as “America’s Pastime,” the Court reasoned that there was no interstate commerce and thus no violation of the Sherman Act despite the Court acknowledging in the same decision that:
Every club in the league earns its profit not only by the drawing capacity of its team at home, but also by that of the teams of the clubs which its team visits in the various cities in the league… The continuous interstate activity of each [club] is essential to all the others. The clubs of each league constitute a business unit embracing territorially a number of different States.
One would assume that this would apply equally to all sports, but that has inexplicably been found not to be the case, and remains so to this day. In 1957, SCOTUS made it abundantly clear that baseball was different than any other sport when it took up the case of a football player who was barred from playing for any NFL team because he had previously played for the All-America Football Conference (AAFC), a rival league at the time. The majority of the Court ruled that the NFL was not exempt from, and had in fact violated the Sherman Act. Justice Clark, writing for the majority, attempted to differentiate between Federal Baseball and the instant case, stating:
If this ruling is unrealistic, inconsistent, or illogical, it is sufficient to answer, aside from the distinctions between the businesses, that were we considering the question of baseball for the first time upon a clean slate we would have no doubts. But Federal Baseball held the business of baseball outside the scope of the Act. No other business claiming the coverage of those cases has such an adjudication. We, therefore, conclude that the orderly way to eliminate error or discrimination, if any there be, is by legislation and not by court decision.[3]
Justice Harlan called out this hypocrisy in his dissent, stating “I am unable to distinguish football from baseball under the rationale of Federal Baseball…and can find no basis for attributing to Congress a purpose to put baseball in a class by itself...”[4]
The United States Department of Justice (DOJ) also tested the bounds of the Federal Baseball decision just four years before Radovich, in 1953, when it brought suit in the United States District Court for the Eastern District of Pennsylvania against the NFL and all of its member teams. The DOJ challenged the NFL’s agreement that barred teams from broadcasting games within seventy-five miles of another team when that team was participating in a broadcasted game away from home. That Court found that the agreement between the NFL and its member teams was definitively an effort to monopolize broadcasting rights and, thus, “an unreasonable and illegal restraint of trade” in direct violation of the Sherman Act.[5] As a result, the NFL teams were barred from such territorial restrictions.
However, the NFL did not go quietly, seeking to run a similar play while hoping for a different outcome. In 1961, the same Eastern District of Pennsylvania federal court stood firm against this undisguised blitz, finding that the joint selling of broadcast rights was also in violation of antitrust laws.[6]
With the courts unwilling to provide football with the same exemptions afforded to baseball, the NFL sought relief from the United States Congress. Congress granted a limited antitrust exemption, permitting the joint sale and/or transfer of broadcasting rights. As the plaintiffs in the NFL Sunday Ticket case correctly point out though, the Sports Broadcasting Act of 1961 exempted only “the free telecasting of professional sports contests,” while providing no such protection for pay, cable and satellite television distribution.[7]
The NFL was forced to confront its vulnerability to the Sherman Act once again in 2009. NFL teams formed National Football League Properties to develop, license, and market apparel and other team related items through exclusive licensing contracts. SCOTUS found that this joint conduct by the NFL and its member teams was not outside the reach of the Sherman Act. SCOTUS stated that the NFL teams cannot join together to restrict the product and increase profits. The Court further made it clear that each and every team “is a substantial, independently owned, and independently managed business,” competing with its rivals “not only on the playing field, but to attract fans, for gate receipts and for contracts with managerial and playing personnel,” as well as “in the market for intellectual property.”[8]
All of these decisions, and the limitations of Congress, has led us here - to the place where plaintiffs alleged, and a jury agreed, that “rather than compete in the multibillion-dollar football broadcasting market, they have joined forces to restrict supply and raise prices.” If this decision survives post-trial motions and appeals, the NFL will be forced to pay damages in the billions to previous Sunday Ticket individual subscribers and restaurants/bars. The landscape of broadcasting rights could also see a seismic shift, with the NFL possibly being prohibited from offering pay services that restrict out-of-market games. Furthermore, this could lead to each team, or the league, offering packages to individual markets - a benefit to those fans in each market who only want to pay for the games they want to watch instead of a bundle of games, which would cost more. Finally, Congress could always get involved to expand the limited exceptions put in place under the Sports Broadcasting Act of 1961.
This case will also have far reaching implications on other professional sports leagues. Will the Courts now scrutinize other agreements? For example, Major League Soccer (MLS) entered into an exclusive ten-year agreement with Apple to broadcast all of its league games. MLS would likely argue that there are no restrictions on out of market games, thus differentiating itself from the NFL. It would also argue that, unlike the NFL, the entire league is a single entity structure where investors can purchase the right to operate a team and, thus, each team is not “a substantial, independently owned, and independently managed business” that competes with the other teams on and off the pitch.
Only time will tell where the next antitrust challenge will come, but professional sports leagues, and even collegiate and high school sports leagues, need to take antitrust laws seriously and avoid the pitfalls the NFL has fallen victim to.
ABOUT THE AUTHOR
Jeffrey A. Cohen is chair of Flaster Greenberg’s Litigation Department. He counsels clients in complex litigation disputes and provides guidance to proactively address business issues. He collaborates with a diverse range of clients including a variety of industries in matters related to sports issues, antitrust disputes, commercial contracts, shareholder and partnership agreements, intellectual property, insurance coverage, and commercial construction. Jeff also co-hosts The Heart of Sports radio show on 860 WWDB & 97.5 HD2 Philadelphia every Friday from 4-5 PM ET (and replay podcasts) to discuss legal issues in professional and amateur sports.
[1] In Re: National Football League Sunday Ticket Antitrust Litigation, Case No. ML15-02668 PSG (SKx).
[2] Federal Baseball Club of Baltimore, Inc. v. National League of Professional Baseball Clubs, 259 U.S. 200 (1922).
[3] Radovich v. National Football League, 352 U.S. 445 (1957).
[4] Id. at 456.
[5] United States v. NFL, 116 F. Supp. 319 (E.D. Pa. 1953) (referred to as “NFL I”).
[6] United States v. NFL, 196 F. Supp. 445 (E.D. Pa. 1961) (“NFL II”).
[7] 15 U.S.C. § 1291-1292.
[8] American Needle, Inc. v. NFL, 560 U.S. 183, 196-97 (2010) (“American Needle”).
