WASHINGTON—The National Football League gets no pass from the nation's antitrust laws, the Supreme Court held Monday.

Despite the coordination needed to run the sports league, the NFL isn't a single entity but rather a consortium of 32 separately owned teams that compete with one another, Justice John Paul Stevens wrote for a unanimous court. The ruling reverses an appeals-court decision and sends the case back to lower courts to be reconsidered

American Needle employee in Buffalo Grove, Ill. The company's suit alleged that the NFL's agreement with Reebok violated antittrust law. Associated Press

The ruling deals a blow not only to the NFL, which has longed for the antitrust exemption baseball has enjoyed since 1922, but also other joint ventures that have been accused of restraining competition, such as credit-card giants MasterCard Inc. and Visa Inc., which originated as consortiums of member banks.

The football case came from the lucrative side business of selling souvenir team caps. For decades, an NFL marketing arm sold nonexclusive licenses to manufacture insignia caps to several vendors. In 2000, however, it decided to sell a 10-year, exclusive license for nearly all team caps to Reebok, a unit of Germany's Adidas AG.

A former supplier, American Needle Inc. of Buffalo Grove, Ill., filed suit under the Sherman Antitrust Act of 1890, which prohibits "every contract, combination...or conspiracy, in restraint of trade." American Needle alleged that the agreement among the NFL, the teams and Reebok violated the Sherman Act.

Antitrust Scorecard

  • 1922 Supreme Court says Major League Baseball is exempt from antitrust laws
  • 1961 Congress passes law letting leagues sell TV rights collectively
  • 1972 Supreme Court rules baseball's antitrust exemption still prohibits players from controlling where they play
  • 1975 Pitcher Andy Messersmith wins right to free agency
  • 1989 U.S. appeals court says NFL labor practices not subject to antitrust challenge during collective bargaining
  • 1992 Federal court rules NFL players have right to free agency under antitrust laws
  • 1998 Congress limits baseball's antitrust exemption with respect to labor issues

The NFL responded that it wasn't a combination at all because the league effectively was a single entity. The Seventh U.S. Circuit Court of Appeals in Chicago agreed with the NFL and threw out the lawsuit.

Justice Stevens wrote that the lower court erred when it defined "NFL Football" as a product competing against other entertainments, while discounting the fact that NFL teams compete against each other in the marketplace as well as on the field.

Not only do the teams compete for fans, ticket sales and players, they "compete in the market for intellectual property," Justice Stevens wrote. "To a firm making hats, the Saints and the Colts are two potentially competing suppliers of valuable trademarks."

Justice Stevens acknowledged that NFL teams shared an interest in the league's profitability, and that the nature of sports competition required cooperation in scheduling games and other decisions.

Still, "although two teams are needed to play a football game, not all aspects of elaborate interleague cooperation are necessary to produce a game," Justice Stevens wrote.

While the NFL won't get a blanket antitrust exemption when the case is sent back to lower courts, the league could argue that selling a single license for NFL team caps was essential to the production of football games. However, the Supreme Court ruling gives a boost to American Needle's argument that the licensing deal represented anticompetitive collusion.

On the Docket


Even if some agreements are necessary to run a football league, Justice Stevens wrote, "it does not follow that concerted activity in marketing intellectual property is necessary to produce football."

His ruling compared football teams to makers of nuts and bolts. "A nut and a bolt can only operate together, but an agreement between nut and bolt manufacturers is still subject" to the Sherman Act, Justice Stevens wrote.

In a statement, the NFL said it remained confident it would prevail in the American Needle case and noted Justice Stevens's assertion that many collective decisions are justified by the teams' shared interest in making the league successful. Reebok referred questions to the NFL.

Had the NFL received a broad antitrust exemption, its teams could have set prices of everything from player salaries to tickets, team jerseys and hot dogs at every stadium without worrying about lawsuits.

The decision was a relief to players' unions, because suing sports leagues under antitrust laws has always been their weapon of last resort during the collective-bargaining process.

"It keeps one more arrow in the players' quiver," said Gabe Feldman, who teaches about sports law at Tulane University Law School.

The NFL's current collective bargaining agreement expires after next season and no formal talks have occurred since February. The head of the league's players association, DeMaurice Smith, called the ruling a victory for players and called on the NFL to "bargain in good faith and avoid a lockout."

The NFL's statement said the Supreme Court's decision "has no bearing on collective bargaining, which is governed by labor law."

The Supreme Court in recent years has been paring back antitrust rules dating from the early 20th century, often taking a more permissive, antiregulatory approach like that championed by conservative law professors at the University of Chicago.

In 2007 alone, the court ruled for antitrust defendants in four separate cases, reversing precedents including a 1911 case that had forbidden manufacturers from setting minimum prices that retailers would have to charge for their products.

Write to Jess Bravin at jess.bravin@wsj.com and Matthew Futterman at matthew.futterman@wsj.com