By Christopher R. Deubert, Senior Writer
The NFL television schedule has a predictability and cadence to it that millions of Americans have come to know and schedule their Sunday affairs around. Generally speaking, fans know that at 1:00 and 4:00, there will be games on CBS and/or FOX. Fans also know that they can usually find their local team in one of those slots. Finally, fans know that if they wish to watch games not being broadcast locally, they either need to subscribe to NFL Sunday Ticket or go to a bar which so subscribes. Some fans and bar owners believe this arrangement violates antitrust law and have reached a critical point in an eight-year litigation effort to prove their case.
In the past two months, plaintiffs and the NFL have exchanged briefing on the NFL’s motion for summary judgment In re: National Football League’s “Sunday Ticket” Antitrust Litigation, 15-ml-02668 (C.D. Cal.). The procedural history is tortured, including an important Ninth Circuit ruling in 2019. But let’s first begin with the relevant legal and factual background.
Antitrust Background
Section 1 of the Sherman Act prohibits “every contract, combination or conspiracy in restraint of trade.” The Supreme Court subsequently clarified that only “unreasonable” restraints are illegal. Certain practices – such as price fixing, market division, or group boycotts – are considered so pernicious and without any procompetitive justification that they are per se illegal, to which there can be no defense. Nevertheless, courts have frequently noted the unique nature of sports and consequently avoid applying the per se analysis to practices of the sports industry which might be per se illegal in other industries.
Antitrust and Sports Broadcasting
In 1951, NFL clubs agreed to rules which prohibited the television broadcasting of their games into another team’s local market whenever the local team was either playing at home or broadcasting its away game in its local territory. The United States Department of Justice sued to block the rule, alleging that it violated Section 1 of the Sherman Act. Judge Grim of the Eastern District of Pennsylvania agreed and enjoined NFL clubs from entering into an agreement that restricted “the sale of rights for the telecasting of outside games in club’s home territory on a day when the home club is permitting the telecast of its away game in its home territory.” As a result of the Court’s ruling, the individual NFL clubs competed against each other on the field and in the market for television broadcasting rights.
The NFL’s upstart competitor, the AFL, however, was not so enjoined. In the late 1950s, AFL clubs pooled their television rights and sold them collectively to ABC. The NFL sought to do the same but Judge Grim denied their request.
The NFL turned to lobbying. In 1961, Congress passed the Sports Broadcasting Act (“SBA”), which provides as follows:
the antitrust laws, as defined in section 1 of the [Sherman] Act… shall not apply to any joint agreement by or among persons engaging in or conducting the organized professional team sports of football, baseball, basketball, or hockey, by which any league of clubs participating in professional football, baseball, basketball, or hockey contests sells or otherwise transfers all or any part of the rights of such league’s member clubs in the sponsored telecasting of the games of football, baseball, basketball, or hockey, as the case may be, engaged in or conducted by such clubs.
Importantly, sponsored telecasting refers to broadcasts which are financed by business enterprises (the “sponsors”) in return for advertising time and are therefore provided free to the public. This definition historically covered broadcasts on channels that were part of basic cable, such as CBS, ABC, and NBC. Thus, the SBA does not exempt league contracts with cable (e.g., ESPN) or satellite television services, for which subscribers are charged a fee, from antitrust liability.
The NFL Sunday Ticket package is not a sponsored telecast and is thus not covered by the SBA. For many years the package was available through DirecTV before moving to YouTube this season at a standard rate of $399 per year.
The package is useful for fans who live in different cities than their favorite teams. However, the package includes all NFL games, not just those of your favorite team. For example, a New York Giants fan living in San Francisco can watch the Giants play the Philadelphia Eagles. But they also are paying for a package that lets them watch the Jacksonville Jaguars versus the Indianapolis Colts, a game in which they might have no interest.
The Ninth Circuit’s Decision
In 2019, the Ninth Circuit held that the plaintiffs plausibly alleged antitrust violations. The court considered the effect of two agreements: (1) the agreement among the 32 NFL clubs to “pool their telecasting rights and give the NFL authority to exercise those rights, rather than exercising those rights individually”; and (2) the agreement between the NFL and DirecTV for the broadcast of out-of-market games. The court determined that the plaintiffs adequately alleged “that the vertical NFL-DirecTV Agreement works in tandem with the Teams-NFL agreement to restrain competition.” Citing NCAA v. Board of Regents, 468 U.S. 85 (1984), the Ninth Circuit found similar allegations of a “‘naked restriction’ on the number of telecasts available for broadcasters and consumers.” The plaintiffs sufficiently alleged that if not for these agreements, more games would be shown on television. For that to be the case, according to the plaintiffs, NFL clubs should be able to sell the broadcasts to their games individually via various cable, satellite, and internet channels.
The NFL’s Motion for Summary Judgment
The NFL’s motion raises several issues.
First, the parties dispute the application of the SBA to the instant matter. The NFL argues that the plaintiffs are improperly attacking the agreements between the NFL and the networks of CBS and FOX which it says are indubitably protected by the SBA. The plaintiffs respond by acknowledging that the network agreements are protected by the SBA but insisting that they nonetheless are “part of the conspiracy to restrain competition outside of the protection of the SBA.” In this respect, the plaintiffs insist that the court must consider the anticompetitive effects of all the NFL’s agreements “working together.”
Second, the NFL resuscitates the somewhat infamous single-entity argument. Specifically, the NFL asserts that it and its member clubs are a single-entity for purposes of licensing telecasts and thus cannot violate Section 1 of the Sherman Act. In making this argument, the NFL differentiates the current case from American Needle, Inc. v. NFL, 560 U.S. 183 (2010), in which the Supreme Court unanimously held that the NFL was not a single-entity for purposes of licensing intellectual property to apparel companies. The NFL argues that clubs “cannot compete to produce telecasts of an NFL game because such productions cannot exist without the cooperation of the NFL and its member clubs.” Televising games necessarily requires “visual display of the League’s and club’s trademarks.” Consequently, the NFL argues that plaintiffs have failed to offer a plausible account of how a club, acting alone, could produce an NFL telecast.
The plaintiffs dispute such coordination is necessary. They point out at that between 1939 and 1960, before the passage of the SBA, NFL teams did in fact sell their television rights individually. Further, the plaintiffs point out that the Notre Dame football team – famously independent of any conference affiliations – sells its telecast rights itself “and has no trouble reaching agreements with the NCAA or the teams it plays over the exhibition of their respective trademarks.”
Third, the NFL argues that plaintiffs lack standing because they did not purchase anything from the NFL – instead they are indirect purchasers who lack standing under antitrust law. The Ninth Circuit rejected this argument, finding plausible allegations of a conspiracy among DirecTV, the NFL, and NFL clubs. The NFL says that, after discovery, there is no evidence of such a conspiracy. Plaintiffs disagree, arguing that the “interlocking” agreements themselves are evidence of the conspiracy.
Finally, the NFL argued that its agreement with DirecTV was a permissible exclusive deal that did not unreasonably restrain competition. Plaintiffs respond that the agreements have resulted in less output than would exist in a competitive market.
In general support of its arguments, the NFL makes substantial usage of the statement from Justice Kavanaugh respecting the denial of the NFL’s petition for certiorari of the Ninth Circuit’s decision in the DirecTV case. Recognizing the need for the NFL to act as a “joint venture,” Justice Kavanaugh opined that “antitrust law likely does not require that the NFL and its member teams compete against each other with respect to television rights.” Plaintiffs respond by stating that they “are not claiming that the teams must, as a matter of law, compete with each other and the NFL so long as they make their own independent business decisions and do not agree with each other not to compete.”
The outcome of the litigation be will monumental for the major North American sports leagues, all of which have some package that out-of-town fans must buy in order to watch certain teams. Given Justice Kavanaugh’s prior thoughts on the case, we might even see a Supreme Court decision – particularly if the court were to find that the NFL is a single-entity under these circumstances. We will all be watching, regardless of our market.
Deubert is Senior Counsel at Constangy, Brooks, Smith & Prophete LLP.
