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NFL Apparel Might Be Separate Market, Court Says

Apparel and hats bearing the logos of National Football League teams might be a distinct market for antitrust purposes, a federal judge in Illinois has ruled, rejecting the NFL's bid to dismiss an antitrust lawsuit filed by a former licensee.

Plaintiff American Needle Inc. designs, manufactures and sells apparel and hats with the names and logos of professional sports teams. For many years, court records say, the company held a non-exclusive license from the NFL to produce and sell merchandise bearing the logos of the league's 32 teams.

The NFL eventually did away with its practice of granting multiple trademark licenses and instead gave Reebok International Inc. exclusive rights to sell NFL apparel and headwear, court records say.

American Needle filed suit against Reebok, the NFL, the owners of the 32 NFL teams and the league's licensing arm, National Football League Properties Inc. The suit, filed in the U.S. District Court for the Northern District of Illinois, alleged the defendants violated the Sherman Act by illegally restraining trade and attempting to monopolize the market for NFL apparel and headwear.

According to court filings, American Needle claimed the defendants' conduct affected six "relevant markets," all relating to the manufacture and sale of headgear and apparel bearing NFL team logos. The defendants moved to dismiss, arguing that none of the proposed market definitions was adequate as a matter of law.

U.S. District Judge James B. Moran said four of the five counts of the complaint could proceed, rejecting the defendants' contention that relevant markets for antitrust purposes cannot be defined by a company's trademarks. The defendants had argued trademarks only indicate the source or sponsorship of goods or services and say nothing about which other products consumers might see as substitutes.

While that is usually true, the judge said, here the NFL team logos can be viewed as the actual product. While some people might buy a T-shirt or hat with a logo just because they need a T-shirt or hat, most people who buy logo-bearing merchandise are fans who would not see other kinds of apparel as a reasonable substitute, the judge said.

Other courts have found that separate markets exist for the television rights to National Collegiate Athletic Association football games and National Basketball Association games, so there is no reason at this early stage of the case to say a distinct market cannot exist for merchandise bearing NFL trademarks, the judge said.

He did dismiss one count of the complaint that alleged a per se violation of antitrust law. The per se rule condemns some types of conduct that courts, through experience, have found to be so anti-competitive that a plaintiff need not define a relevant market or show the defendant has power in that market, Judge Moran explained. Such conduct includes agreements to fix prices or allocate market share.

Courts have repeatedly refused to apply the per se rule to antitrust cases involving sports leagues, he said, because in the case of sports, some restraints are necessary for the product to be available at all.