“Section 1 applies only to concerted action that restrains trade.” —Stevens, Justice 

Facts: The National Football League (NFL) is an unincorporated association that includes 32 separately owned professional football teams. Each team has its own name, colors, logo, trademarks, and other intellectual property. Rather than sell their sports memorabilia individually, the teams formed National Football League Properties (NFLP) to market caps, jerseys, and other sports memorabilia for all of the teams. Until 2000, NFLP granted nonexclusive licenses to a number of vendors, including American Needle, Inc. In December 2000, the teams voted to authorize NFLP to grant exclusive licenses. NFLP granted Reebok International Ltd. an exclusive 10-year license to manufacture and sell trademarked caps and other memorabilia for all 32 NFL teams. American Needle sued the NFL, the teams, and NFLP, alleging that the defendants engaged in an illegal contract, combination, or conspiracy, in violation of Section 1 of the Sherman Act. The defendants argued that they were a single economic enterprise and therefore incapable of the alleged conduct. The U.S. district court held that the defendants were a single entity and granted summary judgment for the defendants. The U.S. court of appeals affirmed the judgment. The case was appealed to the U.S. Supreme Court. Issue Are the NFL, the NFL teams, and the NFLP separate legal entities, capable of engaging in a contract, combination, or conspiracy, as defined by Section 1 of the Sherman Act? Language of the U.S. Supreme Court Section 1 applies only to concerted action that restrains trade. Directly relevant to this case, the teams compete in the market for intellectual property. To a firm making hats, the Saints and the Colts are two potentially competing suppliers of valuable trademarks. Decisions by NFL teams to license their separately owned trademarks collectively and to only one vendor are decisions that deprive the marketplace of independent centers of decision making, and therefore of actual or potential competition. For that reason, decisions by the NFLP regarding the teams’ separately owned intellectual property constitute concerted action. 

Decision: The U.S. Supreme Court held that the NFL, the individual teams, and the NFLP were separate entities capable of engaging in concerted activity, in violation of Section 1 of the Sherman Act. The Supreme Court remanded the case for further proceedings. 

Ethics Questions: Do you think that the defendants’ conduct violated Section 1 of the Sherman Act? Do you think there was any unethical conduct in this case?