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Sunday, July 19, 2009

Munson on American Needle

Lester Munson of ESPN has a lengthy column on American Needle v. NFL (see here, here, and here). Among the many law professors he speaks with is our own Barry Law School-bound Marc Edelman.

I like Munson's stuff. But this piece suffers from a number of weaknesses that plague much popular reporting and conversation on the judicial system. I confess up front that some of this is nitpicking, but it goes to some pet peeves.

First, the piece makes it sound as if whatever the Court says in this case will be the final word on single-entity status. But the antitrust laws are statutory, so Congress always can undo whatever the Court does. And while such statutory or legislative overrides" are relatively rare (witness the many started-but-failed proposals to overturn Federal Baseball Club), the very characteristics that bring the case so much attention in the Court make it a likely candidate for override, depending on what the Court does. Prediction: If the Court holds that the NFL (and by logical extension, all other professional leagues and probably the BCS) is a single entity for Sherman Act purposes, given the dramatic consequences for players and fans described in the article, Congress will act to undo the decision very quickly and across party lines.

Now perhaps the judicial-legislative connection is too much legal detail for a MS(S)M piece. But Munson spends a lot of time spinning out the parade of horribles if the Court adopts the single-entity rule: Strikes, $ 300 team jerseys, rigid league-wide salary scales for players and coaches, the end of individual team broadcasts. But those horribles would not happen because Congress could (and I believe would) step-in (put another way, they only happen if Congress does nothing). That was worth mentioning.

Second, the piece makes what I think is a somewhat lazy move in counting noses (although he cites to "experts," presumably law professors, in doing so): He predicts that Sonia Sotomayor, the Court's newest member once she is confirmed next month, will side with the players, based on her ruling as a district court judge in Silverman v. MLB Player Relations Comm. in 1995, which functionally ended the baseball strike (See Mike's take on the case). This strikes me as silly for a number of reasons. The baseball-strike case had nothing to do with the single-entity rule or the antitrust laws; it was a case under the National Labor Relations Act. Judges are not that result-oriented that we can say that one decision that went against the league under a different statute in a different factual situation is any sort of indicator that she always sides with the players over the leagues. Plus, what about her joining the panel opinion upholding the NFL's age limit in Clarett, which actually might be a closer analogue--at least that case arose under the same law.

Third, Munson spends three paragraphs giving the resumes of the "all-star team of attorneys" that players' unions have hired to litigate the case before the Supreme Court--all from impressive schools, former Supreme Court clerks, and experienced Supreme Court litigators--to illustrate that there should be no doubt how significant this case is and how seriously the Unions are taking it. So, if it were a case before the Court that the Unions believed was less significant or less serious, they would have hired less experienced or competent attorneys? Come on; the case is before the Supreme Court of the United States, so by definition interested parties and entities will seek out top Supreme Court litigators, most of whom went to top schools, clerked for the Court and/or worked in the Solicitor General's Office, and have experience before the Court. That is true regardless of whether the case is the most signficant antitrust case ever or something more routine. This is an example of a fact that is not remotely newsworthy.

Again, I recognize that most of this is my personal annoyances that I get to spread to unsuspecting readers because I happen to write on a blog; fifteen years ago, I would have complained about it to my wife or over lunch at work. Still, these details bothered me for the same reason the Sotomayor hearings last week bothered me: If we are going to have a public discussion of law in which we hope to educate the public, let's try to get it right.

-- Posted by Howard Wasserman @ 7/19/2009 09:00:00 PM -- Comments (11) -- Post a Comment

11 Comments:

Wasserman: Prediction: If the Court holds that the NFL (and by logical extension, all other professional leagues and probably the BCS) is a single entity for Sherman Act purposes, given the dramatic consequences for players and fans described in the article, Congress will act to undo the decision very quickly and across party lines.

There's no telling what sort of mood Congress will be in, or what will be on its plate by the time SCOTUS hands down its decision in this case - and let's face it, with the economy still in shambles, any sports-related bill, no matter how well-intentioned, is bound to smack of misplaced priorities. So I can easily see any reversal effort get lost in the shuffle, or perhaps worse yet, fall victim to horse-trading with respect to other, higher-priority legislation. On the other hand, they could always push through a reversal as part of yet another economic stimulus package...

Joshua -- 7/20/2009 1:18 AM

Maybe you can help me with something...I read Munson's piece and agree with most of what you said here. What I was having trouble understanding is why this possible change would increase prices for tickets? (as Munson mentioned it would) If player/coaches salaries go down, TV pays more for the right to televise, and assorted other advantages to the owner that increase their revenue...how does this translate into higher ticket prices? I understand the higher merchandise and TV prices because of the new heightened competition for the exclusive rights...but with all this going for the owners, wouldn't they then be able to lower prices? Perhaps somebody could clear this up for me?

Timothy -- 7/20/2009 2:09 AM

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Gaming Freebies -- 7/20/2009 5:14 AM

Timothy:

Fair point; after all, it's not as if individual teams are doing all that much to hold down prices under the current structure. Maybe Munson is suggesting that prices will increase not at the top, but that league-wide prices would rise overall if set at the level of the current highest team (i.e., tickets in Kansas City and Green Bay would be raised to New York or Dallas levels). Or maybe he was spinning off the argument that anything that frees the owners from regulation will result in higher prices.

Joshua:

The overriding legislation would be pretty straightforward--"Single entity shall not include sports leagues comprised of multiple, separately owned franchises engaged in competition." And Congress would argue, not inaccurately, that it is acting to protect the financial and comfort interests of fans (see my answer to Timothy, above) and small businesses, which would make this a very popular bill. It would be different than the steroid debacles or Orrin Hatch throwing his weight around because Utah was snubbed by the BCS, both of which look like grandstanding with no tangible effect on the lives of the public.

Howard Wasserman -- 7/20/2009 7:24 AM

Howard,

Excellent post. I agree with you that a decision in favor of the NFL creating a broad exemption would then shift it to the halls of Congress, whether that takes the form of a complete override or individual exceptions to the exemption (i.e. a labor exception). On the labor front, I don't think a ruling in the NFL's favor would be the death nill for players, as some apparently see it. Until sports fans and media conglomerates are willing to spend billions of dollars on replacement/"scab" players, market forces will trump anything the courts or congress does or doesn't do, because unlike any other united unionized workforce in this country the players don't just make the product, they ARE the product.

Lastly, the single entity issue has been beat to death for decades in numerous cases, law review articles, treatises, conferences and symposia, sports law classroom discussions and moot court competitions. The legal arguments on both sides have been exhausted, and no rock has been unturned. Marc made an excellent comment in Munson's article regarding the Supreme Court's focus on economic efficiencies. I think economics plays a more significant role in this issue than the law. The nation's top economists should be arguing this case in front of the justices rather than the nation's top lawyers.

Rick Karcher -- 7/20/2009 7:58 AM

Thanks for posting this Howard, I hadn't yet seen the article. One thing that stuck out to me is that Munson overstated the legal significance of what the NFL is seeking. While a victory for the NFL would certainly be significant, it wouldn't be quite as monumental as the article suggests. For instance, Munson says that the NFL is seeking "immunity from all forms of antitrust scrutiny," that "the league could be vulnerable to antitrust scrutiny only if it were to join with other leagues or other providers of entertainment in setting prices," and that leagues would "enjoy unfettered monopoly powers." Of course, in reality the NFL, NBA, NHL, and MLB would face much greater antitrust exposure than Munson protrays, under not only Section 2 of the Sherman Act, but also a variety of other antitrust measures.

I also think Munson is overstating the effects that a successful single entity finding for the NFL would have on the NCAA or the BCS. Those league structures are significantly different enough that a win for the NFL in American Needle would not necessarily carry over to the college ranks.

Finally, I think it will be interesting to see what position(s) the unions come in with in their amicus briefs. I haven't thought through the benefits and disadvantages as closely as I am sure the unions are presently doing, but it seems to me that as long as the Court carves out an exception to the leagues' single entity status for labor negotiations, a win for the NFL would likely be in the unions' best interest. Under this scenario, the union would likely draw some benefits from a victory by the NFL at the Supreme Court - insofar as they could negotiate a share of any larger profits obtained as a result of the new efficiency benefits - while still maintaining the ability to challenge league labor practices under antitrust law. As I have previously argued, such an exception to the leagues' single entity status could easily be carved out by the Court (http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1373067). In fact, this is just the position taken by the district court in American Needle. It will be interesting to see if the unions limit themselves to arguing only for a labor exception carve out, or if they view the risk of uniform single entity status as being so great as to warrant arguing against single entity status in its entirety.

Nathaniel -- 7/20/2009 10:13 AM

One quick correction to my comment above: Obviously, MLB will not face antitrust scrutiny under Section 2 or any other antitrust measure in the foreseeable future, due to its antitrust exemption. I do find it interesting though that the MLB Players Association is apparently intending to file an amicus brief in American Needle, presumably to protect its rights under the Curt Flood Act of 1998. The fact that the MLB union is taking such a step indicates that it does in fact value the rights obtained under the Act. This does not come as a surprise to me, personally, as I have recently argued that the impact of the Curt Flood Act has been more significant than was widely predicted at the time of its passing (http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1373063).

Nathaniel -- 7/20/2009 10:38 AM

I have an unrelated sports antitrust question that's been bugging me -- I read that the Vikings are threatening to require anyone purchasing a ticket to the Green Bay game to also purchase a preseason game ticket. How is this not an illegal tie?

RCP -- 7/20/2009 11:25 AM

I think Munson is entirely overstating the probable effects of SCOTUS affirming the American Needle decision. The approach the District Court took and the 7th Circuit affirmed was that sports leagues should be analyzed for single entity purposes on a "one league at a time, one facet at a time" basis. So even if SCOTUS affirms, that only means leagues could definitively act as a single entity for the purposes of granting merchandising licenses. For any other aspect of league operations, courts would still have to perform an analysis to determine whether the league was a single entity for that purpose. For things like TV deals and IP licensing, the 7th Circuits holding that leagues are single entities seems pretty straight forward (and these facets have passed rule of reason scrutiny in the past anyway).

The big deal to me seems to be whether this case could lead to leagues being considered single entities for labor purposes. That is the only way most of the doom and gloom Munson predicts would happen. And I think it's pretty clear that while teams work together for TV deals and licensing, they are very clearly competitors within a market for labor. I really don't see a way that the 7th Circuit's holding could be extended to say that leagues are single entities for labor purposes. Obviously the NFL would like to see that happen, and this is the worst case scenario for unions, but unless the Court steps way outside the scope of the 7th Circuit's review I don't see it.

William -- 7/20/2009 10:15 PM

Howard:

Thanks for your kind words. You make a number of excellent points in your post.

At the same time, however, you might be overestimating the likelihood of Congress intervening to protect consumers should the court broadly rule in favor of the NFL teams. I believe this for the following reasons:

(1) While Congress has intervened in sports antitrust on a number of times (i.e., Sports Broadcast Act of 1961), it almost always has done so in favor of league interests. I think this could be the result of strong political lobbying by sports leagues, in contrast to the difficulty in organizing/lobbying faced by individual consumers/fans.

(2) Congress has rarely, if ever, intervened in sports matters in a manner to benefit the individual fan or consumer, to the detriment of league profits. A simple review of all Arlen Specter bills to regulate seem to reveal as much. While some of Specter's bills may border on the obsurd, Arlen Specter's proposals with respect to limiting federal funding to monoplist sports leagues were, for the most part, reasonable. Nonetheless, they failed.

(3) While Congress might enjoy investigating sports matters, they are often far slower to act than investigate. Remember, Congress had been looking at Baseball's monopoly power beginning with the Cellar Hearings in 1950. However, Congress did not pass any language to restrict/define Baseball's antitrust exemption until 1997, when both parties jointly petitioned Congress to do so.

Marc Edelman -- 7/21/2009 3:32 PM

Marc:

Perhaps and I acknowledge that Congress never acted on the antitrust point, despite much talk, for years. But if the consequences of a particular decision are as dire as Munson suggests (and I do not know enough antitrust to say) and if it generates enough noise, Congress might act.

Howard Wasserman -- 7/22/2009 1:54 PM