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Thursday, October 04, 2007
New York Rangers File Antitrust Lawsuit Against NHL

On September 28, Madison Square Garden, L.P., the parent company of the New York Rangers, filed a 35-page antitrust complaint against the National Hockey League ("NHL"), alleging that the NHL illegally restrained trade in various North American markets in violation of Section 1 of the Sherman Act and Section 340 of New York's General Business Law.

The purported anticompetitive conduct cited by Madison Square Garden includes allegations that the NHL teams imposed a series of rules limiting individual team control over their websites, marks, licensing rights, merchandising rights, dashboard sales, and broadcast rights. The complaint further alleges that, "by seeking to control the competitive activities of independent business in ways that are not necessary to the functioning of the [NHL] joint venture, the NHL has become an illegal cartel," and that such "broad collective control over the competitive activities of the independent [hockey] business is inconsistent with federal and New York state antitrust laws."

Based on my reading of this complaint, it seems the lawsuit (although addressing various issues) emerges primarily based on MSG's dislike for a new NHL policy that requires all thirty pro hockey teams to turn over control of their websites to the NHL, and which intends to impose a $100,000 per-day fine on any noncomplying teams. According to the complaint, the Rangers had already invested substantial effort into developing their independent website,, which MSG believes provides the Rangers with a competitive advantage in its ability to sell Rangers merchandise and to broadcast Rangers games throughout cyberspace. Without control over its website and marks, MSG believes that the Rangers will lose some of this competitive advantage.

While it is too early to assess the antitrust merits of this suit, MSG's decision to litigate over these important issues represents a drastic change of approach, as in recent years large-market teams have been reluctant to litigate against sports leagues' attempts to centrally control property rights. This suit is especially interesting in that it seeks to reverse what is now more than a 40-year trend of sports leagues expanding the allocation of property rights at the league level.

Although MSG has attempted to limit its complaint to the challenge of a narrow range of collectivized rights -- even conceding that "legitimate activities [for the NHL] include ... negotiating television broadcast arrangements" -- if MSG were to win this lawsuit, the resulting opinion conceivably could establish precedent that seriously limits the rights of any sports league to collectivize any property right where even a single team were to desire to opt out. In doing so, such an opinion could call into doubt non-unanimous league votes in favor of not only allocating broadcast and merchandising rights, but also effectuating revenue sharing. For that reason, I strongly suspect this case will settle before the court publishes an opinion.

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Other points of note: The law firm Jones Day is representing Madison Square Garden in this lawsuit. Although it has not been announced, presumably Skadden Arps (one of my former employers and long-time antitrust counsel to the NHL) will represent the NHL. Judge Loretta A. Preska of the Southern District of New York is named as the presiding judge.


Thanks for posting, Marc. In light of the NFL's recent success asserting the single entity defense in American Needle, I presume the NHL will itself try to revive the defense here. Although the 2nd Circuit has previously rejected the NFL's assertion of the defense in North American Soccer League, that opinion was issued before the Supreme Court's opinion in Copperweld, and did not involve a challenge from a league member-team. Both factors would arguably distinguish this current case from N.A.S.L.. I look forward to following this litigation.

Anonymous Anonymous -- 10/05/2007 10:05 AM  

"MSG has attempted to limit its complaint to the challenge of a narrow range of collectivized rights -- even conceding that "legitimate activities [for the NHL] include ... negotiating television broadcast arrangements" -> Didn't NCAA v. Board of Regents of Univ. of Oklahoma declare that this practice - for a league to negotiate TV broadcast arrangements - violates section 1 of the Sherman Act through a rule of reason analysis?

Rangers have a good point here. Standardizing and limiting the team website affects the consumers in a negative way and really has no business being regulated by the NHL.

Blogger Adam W -- 10/05/2007 3:33 PM  

To address both of today's comments:

I think our first reader is right on target with his analysis about the NHL's defense strategy (or at least part of it); however, I would caution that there is a subtle difference between a "single entity" defense and a "joint venture with procompetitive effects" defense. Unfortunately, Judge Moran (who decided the American Needle case) seems to have mixed and matched the two terms. Therefore while the NHL might allege both defenses, it is not clear that American Needle would get the NHL anywhere with respect to a true "single entity" defense.

To explain in further, in the case that our reader is referencing, American Needle, Inc. v. New Orleans Lousiana Saints, 496 F.Supp.2d (2007), the court granted the NFL team defendants' motion for summary judgment, dismissing Section 1 claims filed by a coroporation that designed and manufactured NFL trademarked headgear. Based on some language in that case, American Needle Inc. was purporedly dismissed on the grounds that the NFL teams acted as a "single entity" in licensing their intellectual property through NFL Properties. However, what Judge Moran may have meant to say was that the joint venture in property licensing yielded procompetitive effects -- not that the league was a single entity. Moran even acknowledges within his opinion that "supposed efficiencies in economic arrangements are more the stuff of the rule of reason than of distinguishing between single entities and joint ventures." Id. at 944. However, in that case, the mixed-and-match terminology used by Judge Moran was largely irrelevant to the outcome.

The subtle difference in terminology, however, may become important in the MSG v. NHL, depending upon how the facts emerge. If a league were a single entity, it simply could not violate Section 1 of the Sherman Act because a necessary element of a conspiracy (two or more parties) would not be present. Conversely, if a league is a joint venture, the concerted conduct is only permissible if it yields a procompetitive effect.

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With respect to Adam W.'s comments, two quick points:

First, the Sports Broadcast Act of 1961 allows professional sports teams to pool their broadcasting rights; whereas this statutory exemption does not apply to the NCAA.

Second, it is clear that the Rangers are carefully picking and choosing their battles. For various reasons (both internal and external), I doubt that Madison Square Garden would really want to the challenge pooled broadcasting system. Therefore, they are not.

Blogger Marc Edelman -- 10/05/2007 3:58 PM  

I noticed that the Rangers official website switched over from to today. Whatever happened with that lawsuit?

Blogger HockeyDebs -- 11/26/2007 5:50 PM  

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