‘‘Every contract, combination in the form of a trust or otherwise, or, conspiracy, in restraint of trade’’ is made illegal by §1 of the Sherman Act, [citation]. The question whether an arrangement is a contract, combination, or conspiracy is different from and antecedent to the question whether it unreasonably restrains trade. This case raises that antecedent question about the business of the 32 teams in the National Football League (NFL) and a corporate entity that they formed to manage their intellectual property. We conclude that the NFL’s licensing activities constitute concerted action that is not categorically beyond the coverage of §1. The legality of that concerted action must be judged under the Rule of Reason.

   Originally organized in 1920, the NFL is an unincorporated association that now includes 32 separately owned professional football teams. Each team has its own name, colors, and logo, and owns related intellectual property. Like each of the other teams in the league, the New Orleans Saints and 852 Part 9 Regulation of Business the Indianapolis Colts, for example, have their own distinctive names, colors, and marks that are well known to millions of sports fans.

   Prior to 1963, the teams made their own arrangements for licensing their intellectual property and marketing trademarked items such as caps and jerseys. In 1963, the teams formed National Football League Properties (NFLP) to develop, license, and market their intellectual property. Most, but not all, of the substantial revenues generated by NFLP have either been given to charity or shared equally among the teams. However, the teams are able to and have at times sought to withdraw from this arrangement.

   Between 1963 and 2000, NFLP granted nonexclusive licenses to a number of vendors, permitting them to manufacture and sell apparel bearing team insignias. Petitioner, American Needle, Inc., was one of those licensees. In December 2000, the teams voted to authorize NFLP to grant exclusive licenses, and NFLP granted Reebok International Ltd. an exclusive 10-year license to manufacture and sell trademarked headwear for all 32 teams. It thereafter declined to renew American Needle’s nonexclusive license.

   American Needle filed this action in the Northern District of Illinois, alleging that the agreements between the NFL, its teams, NFLP, and Reebok violated §§1 and 2 of the Sherman Act. In their answer to the complaint, the defendants averred that the teams, NFL, and NFLP were incapable of conspiring within the meaning of §1 ‘‘because they are a single economic enterprise, at least with respect to the conduct challenged.’’ After limited discovery, the District Court granted summary judgment [for the NFL] on [this] question * * *.

   The Court of Appeals for the Seventh Circuit affirmed. The panel observed that ‘‘in some contexts, a league seems more aptly described as a single entity immune from antitrust scrutiny, while in others a league appears to be a joint venture between independently owned teams that is subject to review under §1.’’

    As the case comes to us, we have only a narrow issue to decide: whether the NFL respondents are capable of engaging in a ‘‘contract, combination …, or conspiracy’’ as defined by §1 of the Sherman Act, [citation], or, as we have sometimes phrased it, whether the alleged activity by the NFL respondents ‘‘must be viewed as that of a single enterprise for purposes of §1.’’ [Citation.]

   Taken literally, the applicability of §1 to ‘‘every contract, combination … or conspiracy’’ could be understood to cover every conceivable agreement, whether it be a group of competing firms fixing prices or a single firm’s chief executive telling her subordinate how to price their company’s product. But even though, ‘‘read literally,’’ §1 would address ‘‘the entire body of private contract,’’ that is not what the statute means. [Citations.] Not every instance of cooperation between two people is a potential ‘‘contract, combination …, or conspiracy, in restraint of trade.’’ [Citation.]

   The meaning of the term ‘‘contract, combination … or conspiracy’’ is informed by the ‘‘‘basic distinction’’’ in the Sherman Act ‘‘‘between concerted and independent action’’’ that distinguishes §1 of the Sherman Act from §2.

   [Citation.] Section 1 applies only to concerted action that restrains trade. * * *

   Thus, in §1 Congress ‘‘treated concerted behavior more strictly than unilateral behavior.’’ [Citation.] This is so because unlike independent action, ‘‘[c]oncerted activity inherently is fraught with anticompetitive risk’’ insofar as it ‘‘deprives the marketplace of independent centers of decisionmaking that competition assumes and demands.’’ [Citation.] * * * For these reasons, §1 prohibits any concerted action ‘‘in restraint of trade or commerce,’’ even if the action does not ‘‘threate[n] monopolization.’’ And therefore, an arrangement must embody concerted action in order to be a ‘‘contract, combination … or conspiracy’’ under §1.

   We have long held that concerted action under §1 does not turn simply on whether the parties involved are legally distinct entities. Instead, we have eschewed such formalistic distinctions in favor of a functional consideration of how the parties involved in the alleged anticompetitive conduct actually operate. * * *

   Conversely, there is not necessarily concerted action simply because more than one legally distinct entity is involved. * * *

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   * * * The key is whether the alleged ‘‘contract, combination …, or conspiracy’’ is concerted action—that is, whether it joins together separate decisionmakers. The relevant inquiry, therefore, is whether there is a ‘‘contract, combination … or conspiracy’’ amongst ‘‘separate economic actors pursuing separate economic interests,’’ [citation], such that the agreement ‘‘deprives the marketplace of independent centers of decisionmaking,’’ [citation], and therefore of ‘‘diversity of entrepreneurial interests,’’ [citations]. Thus, while the president and a vice president of a firm could (and regularly do) act in combination, their joint action generally is not the sort of ‘‘combination’’ that §1 is intended to cover. Such agreements might be described as ‘‘really unilateral behavior flowing from decisions of a single enterprise.’’ [Citation.] Nor, for this reason, does §1 cover ‘‘internally coordinated conduct of a corporation and one of its unincorporated divisions,’’ [citation], because ‘‘[a] division within a corporate structure pursues the common interests of the whole,’’ [citation], and therefore ‘‘coordination between a corporation and its division does not represent a sudden joining of two independent sources of economic power previously pursuing separate interests,’’ [citation]. Nor, for the same reasons, is ‘‘the coordinated activity of a parent and its wholly owned subsidiary’’ covered. * * * Nor, however, is it determinative that two legally distinct entities have organized themselves under a single umbrella or into a structured joint venture. The question is whether the agreement joins together ‘‘independent centers of decision-making.’’ [Citation.] If it does, the entities are capable of conspiring under §1, and the court must decide whether the restraint of trade is an unreasonable and therefore illegal one.

   The NFL teams do not possess either the unitary decisionmaking quality or the single aggregation of economic power characteristic of independent action. Each of the teams is a substantial, independently owned, and independently managed business. ‘‘[T]heir general corporate actions are guided or determined’’ by ‘‘separate corporate consciousnesses,’’ and ‘‘[t]heir objectives are’’ not ‘‘common.’’ [Citations.] The teams compete with one another, not only on the playing field, but to attract fans, for gate receipts and for contracts with managerial and playing personnel. [Citations.]

   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. When each NFL team licenses its intellectual property, it is not pursuing the ‘‘common interests of the whole’’ league but is instead pursuing interests of each ‘‘corporation itself,’’ [citation]; teams are acting as ‘‘separate economic actors pursuing separate economic interests,’’ and each team therefore is a potential ‘‘independent cente[r] of decision-making,’’ [citation]. Decisions by NFL teams to license their separately owned trademarks collectively and to only one vendor are decisions that ‘‘depriv[e] the marketplace of independent centers of decision-making,’’ [citation], and therefore of actual or potential competition. [Citation.] * * *

   Although NFL teams have common interests such as promoting the NFL brand, they are still separate, profit-maximizing entities, and their interests in licensing team trademarks are not necessarily aligned. [Citations.]

   * * * Respondents argue that nonetheless, as the Court of Appeals held, they constitute a single entity because without their cooperation, there would be no NFL football. It is true that ‘‘the clubs that make up a professional sports league are not completely independent economic competitors, as they depend upon a degree of cooperation for economic survival.’’ [Citation.] But the Court of Appeals’ reasoning is unpersuasive. The justification for cooperation is not relevant to whether that cooperation is concerted or independent action. A ‘‘contract, combination … or conspiracy,’’ §1, that is necessary or useful to a joint venture is still a ‘‘contract, combination … or conspiracy’’ if it ‘‘deprives the marketplace of independent centers of decisionmaking,’’ * * * But that does not mean that necessity of cooperation transforms concerted action into independent action. * * * Nor does it mean that once a group of firms agree to produce a joint product, cooperation amongst those firms must be treated as independent conduct. The mere fact that the teams operate jointly in some sense does not mean that they are immune. The question whether NFLP decisions can constitute concerted activity covered by §1 is closer than whether decisions made directly by the 32 teams are covered by §1. This is so both because NFLP is a separate corporation with its own management and because the record indicates that most of the revenues generated by NFLP are shared by the teams on an equal basis. Nevertheless we think it clear that for the same reasons the 32 teams’ conduct is covered by §1, NFLP’s actions also are subject to §1, at least with regards to its marketing of property owned by the separate teams. NFLP’s licensing decisions are made by the 32 potential competitors, and each of them actually owns its share of the jointly managed assets. [Citation.] Apart from their agreement to cooperate in exploiting those assets, including their decisions as the NFLP, there would be nothing to prevent each of the teams from making its own market decisions relating to purchases of apparel and headwear, to the sale of such items, and to the granting of licenses to use its trademarks. * * * Thirty-two teams operating independently through the vehicle of the NFLP are not like the components of a single firm that act to maximize the firm’s profits. The teams remain separately controlled, potential competitors with economic interests that are distinct from NFLP’s financial well-being. [Citation.] Unlike typical decisions by corporate shareholders, NFLP licensing decisions effectively require the assent of more than a mere majority of shareholders. And each team’s decision reflects not only an interest in NFLP’s profits but also an interest in the team’s individual profits. [Citation.] The 32 teams capture individual economic benefits separate and apart from NFLP profits as a result of the decisions they make for the NFLP. NFLP’s decisions thus affect each team’s profits from licensing its own intellectual property. ‘‘Although the business interests of ’’ the teams ‘‘will often coincide with those of the’’ NFLP ‘‘as an entity in itself, that commonality of interest exists in every cartel.’’ [Citation.] In making the relevant licensing decisions, NFLP is therefore ‘‘an instrumentality’’ of the teams. [Citation.] If the fact that potential competitors shared in profits or losses from a venture meant that the venture was immune from §1, then any cartel ‘‘could evade the antitrust law simply by creating a ‘joint venture’ to serve as the exclusive seller of their competing products.’’ [Citations.] However, competitors ‘‘cannot simply get around’’ antitrust liability by acting ‘‘through a third-party intermediary or ‘joint venture.’’’ [Citation.]

   * * * The fact that NFL teams share an interest in making the entire league successful and profitable, and that they must cooperate in the production and scheduling of games, provides a perfectly sensible justification for making a host of collective decisions. But the conduct at issue in this case is still concerted activity under the Sherman Act that is subject to §1 analysis. When ‘‘restraints on competition are essential if the product is to be available at all,’’ per se rules of illegality are inapplicable, and instead the restraint must be judged according to the flexible Rule of Reason. [Citations.] And depending upon the concerted activity in question, the Rule of Reason may not require a detailed analysis; it ‘‘can sometimes be applied in the twinkling of an eye.’’ [Citation.]

   Other features of the NFL may also save agreements amongst the teams. We have recognized, for example, ‘‘that the interest in maintaining a competitive balance’’ among ‘‘athletic teams is legitimate and important.’’ [Citation.] While that same interest applies to the teams in the NFL, it does not justify treating them as a single entity for §1 purposes when it comes to the marketing of the teams’ individually owned intellectual property. It is, however, unquestionably an interest that may well justify a variety of collective decisions made by the teams. What role it properly plays in applying the Rule of Reason to the allegations in this case is a matter to be considered on remand.

   Accordingly, the judgment of the Court of Appeals is reversed, and the case is remanded for further proceedings consistent with this opinion.