By Tim LaComb, of MoginRubin LLP
(Editor’s note: In October, a federal judge from the Eastern District of Michigan granted the plaintiff’s motion to amend the lawsuit. This article examines the claims made in the litigation.)
Mayfield Athletics, maker of a football helmet shock absorber called the “S.A.F.E.Clip,” is embroiled in antitrust litigation against the National Operating Committee on Standards for Athletic Equipment (“NOCSAE”) and three dominant football helmet manufacturers. Mayfield alleges the defendants entered into explicit and implicit agreements that unreasonably restrained trade in the helmet add-on aftermarket in violation of Section 1 of the Sherman Act.
Background
Mayfield manufactures the S.A.F.E.Clip, which is an aftermarket product that purportedly reduces the impact to the football player’s helmet each time the payer is hit. Mayfield claims that “the use of the S.A.F.E.Clip resulted in force reductions as high as 35% per hit” after multiple rounds of testing. Mayfield does not manufacture helmets and, therefore, is designed to integrate with most popular football helmet models.
NOCSAE is a nonprofit standard setting organization that develops voluntary performance and test standards for athletic equipment. Most football regulatory bodies of all ages and skill levels require players to use football helmets that comply with NOCSAE standards. As a result, if equipment does not receive NOCSAE certification, then it is largely excluded from the football safety equipment market.
The helmet manufacturer defendants include Riddell, Inc., Schutt Sports, and Xenith, LLC. Collectively, these defendants control nearly 100% of football helmet sales. Each also allegedly competes against Mayfield in the helmet add-on market.
NOCSAE has adopted policies that allow helmet manufacturers to declare a certification void if an add-on product is incorporated into its helmet. Notably, the helmet manufacturers maintain this right even if a helmet with an add-on continues to meet NOCSAE safety standards.
NOCSAE also entered into licensing agreements with the helmet manufacturer defendants that allow the defendants to place NOCSAE trademarked logos and phrases on their equipment in exchange for a portion of each helmet sale. According to Mayfield, these agreements enable the defendants to “establish and maintain a monopoly on the market for football safety equipment and accessories, to the exclusion of manufacturers of aftermarket or add-on products,” including Mayfield’s S.A.F.E.Clip.
Mayfield further alleges that the defendants conspired among themselves to void certifications any time a rival’s add-on product was incorporated into their helmet. And, because helmet manufacturers are responsible for nearly 100% of football helmet sales, this group boycott prevented rivals from competing in the add-on market.
Analysis
Football safety products require NOCSAE certification to be commercially viable. NOCSAE, through its policies, enables the dominant helmet manufacturers to dictate which add-on products receive certification, regardless of the impact the add-on has on player safety. These policies appear to be member driven because they are divorced from safety considerations and, therefore, inconsistent with NOCSAE’s mission of enhancing athletic safety. And, as the U.S. Supreme Court has made clear, standard setting organizations like NOCSAE “can be rife with opportunities for anticompetitive activity.” Am. Soc’y of Mech. Eng’rs v. Hydrolevel Corp., 456 U.S. 556, 571, 102 S. Ct. 1935, 1945 (1982).
Even so, Mayfield’s claims are unlikely to succeed as currently pleaded. Mayfield argues the licensing agreements between the helmet manufacturers and NOCSAE are unreasonable restraints on trade. But Mayfield’s argument appears misguided. NOCSAE’s policies – not the licensing agreements – give the helmet manufacturers the power to void certification if any add-on is included and, therefore, are the source of the purportedly unreasonable restraint.
Mayfield also alleges that the defendants have conspired to engage in an unlawful group boycott to restrain trade in the add-on market. But as is often the case in pre-discovery litigation, Mayfield struggles to allege facts that show concerted action on the part of defendants. This is particularly true because defendants ostensibly have rational business justifications for refusing to deal with Mayfield, mainly that add-ons create potential sources of liability for helmet manufacturers and at least two of the defendants have voiced significant safety concerns to Mayfield regarding the S.A.F.E.Clip.
Conclusion
Mayfield tells a compelling story and may ultimately find redress under the antitrust laws. However, if dismissed and permitted to amend, Mayfield should refocus its challenge on NOCSAE’s anticompetitive policies because these are the source of the challenged restraint. While such a theory introduces new hurdles for a Section 1 claim (e.g., the absence of an explicit agreement with helmet manufacturers), it likely provides Mayfield with its best path forward. But, regardless of the outcome of its litigation, Mayfield has shed light on a significant competitive deficiency in the helmet add-on market that should be remedied in some manner.
Tim LaComb is an Associate in MoginRubin LLP’s San Diego office and his practice focuses on antitrust, unfair competition, and complex business litigation, particularly as they relate to mergers and acquisitions.
