American Needle vs. NFL - The NFL's Ludicrous Argument

From Brad Humphreys at TSE:

The Supreme Court heard oral arguments in the American Needle v. National Football League case yesterday. The central issue in the case, whether or not the NFL is a "single entity" and exempt from anti-trust law, could have profound effects on the way the league does business.

Newspaper reports on the arguments suggest that the Court was not receptive to the NFL's arguments. The NFL argued that the sale of merchandise with team logos was not aimed at making profits, but instead was intended to promote the league. The New York Times coverage emphasized the skepticism of the justices. The Washington Post coverage focused more on the idea that, if the NFL wins, it could gain a blanket anti-trust exemption. Both articles clearly indicate that the tone of the arguments indicated that the court was not buying the NFL's arguments.

That argument by the NFL is purely laughable.  Why would the NFL want to promote itself in the first place?  To make profits, of course.  And why do they want to make the decision collectively?  Because the collusive profit per member is higher than the competitive profit per member.

Here's some more information on the case.  Here is a link to the amicus brief written by some prominent sports economists.  Here is a post by Nathaniel Grow over at the Sports Law Blog with some more information on the case and links to more briefs.

Update:  John Palmer forwarded Brad Humphrey's resource page to me via email.  It contains all kinds of useful information on this case.

Comments

[EclectEcon]

I gotta think about this more and maybe write something about it. My views seem to clash with all sports economists, though. I don't have a problem with having a franchisor tell franchisees what they can and cannot do. And even if there is problem, I can't imagine the social cost is very large. So Reebok won a contract and American Needle is using the gubmnt to try to win it back. The major social cost is the use of the gubmnt and the courts, not the deadweight loss due to whatever monopoly power the franchisor might have.

[Phil]

What is the firm in sports? Is it an individual team, a pair of teams (since it takes two to play a game), or the entire league?

[John]

Phil, I'd say it's the entire league. That's why I think it's laughable that Jerry Jones rages against "socialism" in the NFL. The Cowboys would have no business were not not for the Eagles, Giants ... even the Lions and Redskins!

[Phil]

The "Peculiar Economics of Team Sports" rears its head. True, it takes at least two teams to produce a game and having more teams, to some point, increases overall interest. But why is it that this condition trumps interteam competition between teams in various product markets?

[Chicago Bears Hats Fan]

To be honest, I wish reebok didnt get the contract. I don't care much for their designs.