The Puzzling Persistence of the Single Entity Argument for Sports Leagues: American Needle and the Supreme Court's Opportunity to Reject a Flawed Defense
75 Pages Posted: 15 Sep 2009 Last revised: 4 Feb 2010
Date Written: September 15, 2009
Later this term, the Supreme Court will hear American Needle v. National Football League, a case that might fundamentally change professional sports and rewrite sports antitrust law. In American Needle, the Seventh Circuit held that the National Football League (NFL) acts as a single entity when licensing its intellectual property and thus is immune from scrutiny under Section 1of the Sherman Act. Although the Seventh Circuit is the first circuit court to hold that a sports league is a single entity, the argument that leagues act as single entities has persisted for decades. Leagues view the single entity defense as the antitrust “holy grail,” because it shields them from Section 1 attack and costly antitrust litigation. Section 1 explicitly requires an agreement, and an agreement requires more than one entity. Thus, as a matter of law, a single entity cannot violate Section 1.
This Article argues that a single entity classification for sports leagues divorces antitrust immunity from the fundamental purpose of the antitrust laws and is theoretically unsupportable. Antitrust law is designed to act as a gatekeeper, filtering out net anticompetitive conduct. The Seventh Circuit’s single entity approach ignores the competitive effects of league conduct and distorts the basic rationale for distinguishing between single and multiple entity conduct. In doing so, it vests sports leagues with virtually free rein to engage in anticompetitive behavior. This Article also brings to light evidence of actual economic competition between NFL teams that proves that the Seventh Circuit’s single entity analysis in American Needle is factually unsupportable. This Article thus concludes that the Supreme Court should definitively put an end to the single entity defense for professional sports leagues. The Article also proposes a model for streamlining the rule of reason analysis and reducing the litigation burden on sports leagues.
Keywords: American Needle, Antitrust, Sherman Act, National Football League, Single entity, restraint of trade, professonal sports leagues
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