The Unmentioned Consequences of the NFL's Recent Legal Battles

 

This article was updated in March 2011 due to the Supreme Court's dismissal of the Spygate lawsuit discussed below.

When the typical fan views the NFL, he likely sees it as 32 separate teams fighting against one another to achieve the ultimate goal – that of Super Bowl champion. To reach that pinnacle of success, teams seemingly combat against each other for free agents, test and rank college athletes in order to steal the best draft picks away from their rivals, and even occasionally trade players to fill holes or strengthen weaknesses.

Professional football is a battle; fought on common ground and with shared rules, but like life, only the fittest will survive.

That is the perception. The reality, as seen in two recent court cases involving the NFL, is the complete opposite.

While the NFL has surpassed Major League Baseball in television ratings to become America’s favorite pastime, there is still one perk the MLB has the NFL desires – its antitrust status.

Baseball was granted its broad antitrust status in 1922 when the Supreme Court ruled in baseball’s favor in the case Federal Baseball Club of Baltimore, Inc v. National Baseball Clubs. The short-lived Federal League (1914-15) sued the loosely connected National and America Leagues over the inability to sign away their opposition’s players. The Federal League’s complaint was based on a perceived antitrust violation. The Supreme Court shot down the Federal League’s argument, ruling that though teams crossed state lines to play games, it was “not the essential thing” as the games themselves were local events (this prior to national radio and television broadcasts).

The Supreme Court’s ruling signaled not just the final destruction of the Federal League, but the dawn of baseball’s antitrust status.

 That status was challenged twice, in 1953 and again in 1972, but has always held its ground. In the 1972 case, when Curt Flood sued baseball to become a free agent, the Supreme Court ruled that it would be up to Congress to revoke MLB’s antitrust exemption. Until the recent steroid scandal that reached to the level of congressional hearings, baseball has had little to worry about in this regard.

The NFL already possesses one huge antitrust exemption courtesy of President Kennedy which allows the NFL to package its games for sale to the television networks (which brings the league upwards of $6 billion a season today).

Yet the league still wants a bigger piece of that antitrust pie for itself. Why? For one, an antitrust exemption could shield the NFL from issues surrounding player salaries and the location of its franchises. But it goes beyond just that. As Stefan Fatsis wrote, “Granted antitrust immunity, leagues will set uniform and inflated prices for tickets and stadium parking and beer. Unions will be crippled as leagues impose lowball salaries and restrict free agency. Dozens of licensees will be shut out as behemoths cut exclusive deals that send jersey prices skyrocketing.” Fatsis admitted that is the extreme result, yet without a doubt it is in the realm of possibility.

As the NFL’s attempts to get this grant from Congress fell on deaf ears, the league saw a potential opening when the company American Needle sued the league (and Reebok) in 2004. In the lawsuit, American Needle alleged that the NFL’s exclusive deal with Reebok (which was brokered by New England Patriots owner Robert Kraft through his person friend, the former owner of Reebok, Paul Fireman) broke antitrust laws, effectively granting Reebok a monopoly over NFL licensed apparel.

As the NFL won in the lower courts, American Needle appealed the decision all the way to the Supreme Court in early 2010. Remarkably, the NFL backed that appeal, thinking it was a loophole to take advantage of in order to get its coveted antitrust exemption.

The NFL’s argument was rather straight-forward: It claimed that it is not a collection of 32 individual teams, but rather a single entity. NFL lawyer Gregg H. Levy made the argument that as "long as the NFL clubs are members of a unit; if they compete as a unit in the entertainment marketplace ... they should be deemed a single entity" and not subject to antitrust law.

Levy also argued that NFL teams license their trademarks and logos jointly in order to better promote the league as a whole.
The Court was skeptical of the league’s stance. Justice Antonin Scalia replied to Levy, "Well, the stated purpose is to promote the game, [but] the purpose is to make money. I don't think that they care whether the sale of the helmet or the T-shirt promotes the game. They sell it to make money from the sale."

To that, Levy countered that NFL merchandise is "to improve and promote the attractiveness of the game product, to get more people interested in watching the games on television, to get more people interested in buying tickets to the game."
The Court didn’t seem to agree. Newly appointed Justice Sonia Sotomayor stated, "I can very much see a counterargument that promoting T-shirts is only to make money. It doesn't really promote the game. It promotes the making of money. And once you fix prices for making money, that's a Sherman [antitrust] Act violation."

Levy continued to battle for the NFL’s stab at antitrust status. He claimed that since the NFL’s individual teams could not create their product (meaning, the games) on their own, then therefore nothing controlled by each team such as their logos could exist without the others. In essence, the NFL had to be considered a single entity, otherwise the teams couldn’t operate.

While the Court deliberated, more was going on behind the scenes in the NFL.

In association with the American Needle case, NFL Players Association lawyer Jeffrey Kessler remarked that NFL teams believe they should be allowed to "fix the prices of labor, that they could impose restrictions that would prevent good teams from getting better, or take any other conduct without the antitrust laws coming into play."

Levy again stepped up for the NFL, stating "This case doesn't have anything to do with union agreement issues.”

Really? Tennessee Titans center Kevin Mawae begged to differ. Mawae told a congressional committee, “A judgment [by the Supreme Court] in favor of the NFL could severely damage the system that we've had in place for the last 20-something years.”

Democrat Hank Johnson of Georgia wondered why the NFL needed “special antitrust immunity? The NFL is seeking indirectly from the courts what it could not get from Congress.” This was exactly the case.

The answer for the reason why came from Mawae: “We want Congress to know that management is pushing us toward a lockout.”
Under the current NFL labor deal, the players receive approximately 60 percent of league revenues. The NFL owners consider that to be too much. After the “uncapped” 2010 NFL season, there’s reason to believe the owners won’t allow the 2011 season to begin until they have a more favorable deal which would likely lower the players’ revenue share to perhaps 40 percent.

How likely is it that there won’t be a 2011 NFL season? According to Executive Director of the NFL Players Association DeMaurice Smith in a February 2010 Sports Illustrated.com article, “On a scale of 1 to 10, it’s a 14.”

What should rightly scare both NFL players and their fans is the fact that NFL owners would earn $5 billion from their television revenue deal even if no football is played in 2011. As Smith stated, “Has any one of the prior deals included $5 billion to not play football? The answer's no.”

The NFLPA is advising its members to prepare for the worst and save their money. Even if there is no lockout, players may be facing an 18 percent pay cut which is estimated to be about $340,000 per player on average.

The NFL players, in appealing to Congress, were asking for not just help, but actual oversight of the league. Houston Texans guard Chester Pitts said, “I want Congress to review why they gave the [antitrust] exemption [for television]. Right now, the NFL has [very little] oversight. We want more.”

While the NFL and its players’ union negotiate their collective bargaining agreement, the Supreme Court decided the American Needle case. The verdict? In a unanimous decision, the Court ruled in favor of American Needle.

The NFL lost.

 Justice John Paul Stevens wrote, “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.” He continued exploring how the teams are individualized by writing that they compete “to attract fans, for gate receipts and for contracts with managerial and playing personnel.” He concluded, “Directly relevant to this case, the teams compete in the market for intellectual property. To a firm making hats [such as American Needle], the Saints and the Colts are two potentially competing suppliers of valuable trademarks.”

Stevens dismissed the NFL’s argument that teams need each other in order to play, writing, “A nut and a bolt can only operate together, but an agreement between nut and bolt manufacturers is still subject to [antitrust laws].”

The NFL feared that the Court’s ruling “would convert every league of separately owned clubs into a walking antitrust conspiracy” resulting in more potential lawsuits, but Stevens disagreed.

 
"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," he said.

Though the NFL lost, what is important to take away from this case is the reality of the league’s make-up. Despite what the Justices ruled, the NFL sees itself not as 32 independent entities; it considers itself one unit. While that argument was made before the Supreme Court, the existence of the league’s revenue sharing program should have previously proved that truth. Approximately 80% of the $8-9 billion the NFL earns each year is divided equally among its teams. No pro sports league shares its profits to that extent.

The bulk of those profits come directly from the league’s product: the games. As the NFL argued, everything it does is to both support and promote the games.

The biggest problem is that the games do not have to be on the level.

The NFL’s own lawyer stated that the league competes in the “entertainment marketplace.” Because NFL football is in fact entertainment and nothing more, perhaps that was why in yet another court ruling, it was proven that the NFL could fix its own games and legally get away with it.

The Spygate lawsuit

Carl Mayer is a New York Jets season ticket holder. He is also a lawyer. When it was discovered that the New England Patriots were videotaping their opponents’ coaching signals – a scandalous event later dubbed “Spygate” that shook the NFL in 2007 – it happened to come to light during a Jets-Patriots game.

Mayer sued, seeking $185 million in damages on behalf of all Jets ticket holders. His claim was that due to the Patriots’ actions, the games between the two franchises were essentially rigged since Patriots Head Coach Bill Belichick took control of the team in 2000. In early 2010, the case reached the U.S. 3rd Circuit Court of Appeals.

In May 2010, the appeals court judges tossed the case. The Senior Judge of the three judge panel Robert E. Cowen wrote in his precendential opinion (which you can read here), “We do not condone the conduct on the part of the Patriots and the team's head coach, and we likewise refrain from assessing whether the NFL's sanctions (and its alleged destruction of the videotapes themselves) were otherwise appropriate.” But the reason why Cowen and the other judges decided against Mayer was because, “At best, he [Mayer] possessed nothing more than a contractual right to a seat from which to watch an NFL game between the Jets and the Patriots, and this right was clearly honored.”

Cowen went on to write, "Mayer possessed either a license or, at best, a contractual right to enter Giants Stadium and to have a seat from which to watch a professional football game. In the clear language of the ticket stub, ‘[t]his ticket only grants entry into the stadium and a spectator seat for the specified NFL game.’ Mayer actually was allowed to enter the stadium and witnessed the ‘specified NFL game[s]’ between the Jets and Patriots. He thereby suffered no cognizable injury to a legally protected right or interest.” 

He then concluded, "We do not condone the conduct on the part of the Patriots and the team’s head coach, and we likewise refrain from assessing whether the NFL’s sanctions (and its alleged destruction of the videotapes themselves) were otherwise appropriate. We further recognize that professional football, like other professional sports, is a multi-billion dollar business. In turn, ticket-holders and other fans may have legitimate issues with the manner in which they are treated….Significantly, our ruling also does not leave Mayer and other ticket-holders without any recourse. Instead, fans could speak out against the Patriots, their coach, and the NFL itself. In fact, they could even go so far as to refuse to purchase tickets or NFL-related merchandise….However, the one thing they cannot do is bring a legal action in a court of law. [emphasis in original].”

Mayer’s lawyer, Bruce Afran, disagreed. He believed consumer fraud had occurred. He said, “(The opinion) seems to suggest that no matter how much ticket holders pay, they can be defrauded by NFL teams. And it puts the NFL on the same level as professional wrestling.”

Because there is no law outside of the loose interpretation of fraud from preventing a league from fixing its own games, Afran’s conclusion is correct. One cannot fix a sporting event for gambling purposes; that is illegal. And one cannot fix an intellectual contest for entertainment purposes; that was made illegal after the quiz show scandal of the 1950s.

But fix a sporting event for entertainment purposes? Completely legal.

What’s worse, the lawyer representing the NFL, Shepard Goldfein, actually argued in court that “fans likely would buy tickets even if they knew the Patriots were stealing signals.” In other words, the NFL realizes that much like pro wrestling, even if fans knew the football was rigged, they still pay their money to see it.

In March 2011, the Supreme Court refused to hear Mayer's appeal thereby affirming the lower court's findings.

As these two court cases prove, it is time to see the NFL in a completely different light. It is not a loosely organized group of teams fighting tooth-and-nail to beat their rivals. No, the NFL is a well-organized machine out to maximize its profits by doing everything within their power to make people consume their product: the games.

…And that includes possibly allowing fixed games to occur because sucker fans would still pay to watch them play football. 

This piece was based upon and the quotes used within it were taken from the following:

AP article, “Justices seem skeptical of arguments.” January 13, 2010.

AP article, “NFL players union lobbies Congress in battles with league owners.” January 20, 2010.

AP article, “NLFPA’s Smith paints bleak picture of league’s labor situation.” February 4, 2010.

AP article, “Court tosses Jets’ fan lawsuit over Patriots’ secret videotaping.” May 19, 2010.

AP article, “Supreme Court rules NFL is 32 teams, not single business.” May 24, 2010.

Fatsis, Stefan. “Supreme Court voices resistance to NFL in antitrust case.” sportsillustrated.com, January 13, 2010.