By Christopher R. Deubert, Senior Writer
Soccer superstar Lionel Messi’s entry into Major League Soccer (MLS) has come with the expected and hoped-for sold-out stadiums and increased viewership of MLS games on Apple TV. Prior to this season, MLS and Apple agreed to a ten-year agreement for $2.5 billion that put all MLS games on Apple TV, a paid subscription service. Consequently, if you want to watch Messi play with his Inter Miami FC squad, you must pay $99 per season (or $79 for Apple TV+ subscribers). Such an arrangement invites antitrust scrutiny.
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[1]
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.”[2] 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.[3]
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 is engaged in a long-running battle in which plaintiff-consumers allege that the NFL’s DirecTV NFL Sunday Ticket package is an antitrust violation. NFL Sunday Ticket – now on YouTube – provides fans of teams that play in different cities the ability to watch all of that team’s games. But to do so, you must subscribe to the NFL Sunday Ticket package, which costs a minimum of $300 annually. 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. According to the plaintiffs, NFL clubs should be able to sell the broadcasts to their games individually via various cable, satellite, and internet channels.
In 2019, the Ninth Circuit held that the plaintiffs plausibly alleged antitrust violations.[4] The NFL has recently moved for summary judgment, as will be covered in future Sports Litigation Alerts after briefing is complete.
Application to MLS
There are surely fans out there who would like to watch Messi play, but have little to no interest in watching any other MLS matches. Nevertheless, if they want to watch Messi, they must pay for MLS Season Pass which, like the NFL Sunday Ticket, includes all MLS matches. For casual fans, they may wish that Inter Miami FC made their match broadcasts available for purchase either individually or on a season-wide basis. Yet, the agreements among MLS clubs and the league’s agreement with Apple prohibit such sales. These arrangements are clearly restrictions on the output of commercial products or services that would be desirable by consumers, the type of practice the antitrust laws is designed to prevent.
MLS though has defenses. First and foremost, MLS would allege it is a single-entity and as such it lacks the plurality of actors necessary for a Section 1 violation. MLS was famously structured differently than the other professional sports leagues for the purposes of avoiding antitrust scrutiny. Specifically, MLS is a limited liability company whose members are the 28 legal entities operating the professional soccer clubs competing in the league. The LLC contracts with and is technically the primary employer of players. By virtue of this arrangement, MLS claims it cannot conspire to suppress the player labor market, of which other leagues have been found liable. Nevertheless, the First Circuit did not buy this argument in 2002,[5] and I do not believe the argument is viable today.[6]
While the single-entity defense likely would not prevail in the labor context, it might have success when it comes to television broadcast agreements. The MLS Constitution provides that Soccer United Marketing (SUM), MLS’ commercial arm, “has the exclusive right to sell MLS’s national commercial rights, including sponsorship, broadcasting and consumer product licenses.” Of additional relevance, MLS owns each club’s intellectual property, such as its trademarked logos. Consequently, MLS would claim that in selling broadcast rights to its matches, it is a single commercial entity.
This argument, while meritorious, is also subject to attack. MLS is only a “single-entity” by virtue of agreements executed among its members, including most specifically the MLS Operating Agreement. However, as the Supreme Court said in American Needle, Inc. v. NFL, “competitors cannot simply get around antitrust liability by acting through a third-party intermediary or joint venture.”[7] In that case, the Supreme Court in rejected the NFL’s argument that it was a single-entity for purposes of licensing its intellectual property.
The NFL, in the DirectTV case, argues that broadcasting agreements are different. The NFL says that in order for there to be television broadcasts of NFL games at all, there must be an agreement among the clubs. More specifically, the NFL asserts that in order to produce and broadcast games, the clubs must come together and negotiate with their employer-players, agree upon the rules of the game, and agree upon a schedule. Moreover, the NFL argues, because NFL game broadcasts necessarily include the trademarks of both clubs, you could not broadcast the game without an agreement about the usage of such marks.
In this vein, 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.”[8]
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The outcome of the NFL’s DirecTV 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 that Messi’s popularity seems to exceed the remaining collective interest in MLS, the MLS Season Pass may be the next antitrust target for fans.
Deubert is Senior Counsel at Constangy, Brooks, Smith & Prophete LLP.
[1] This history is paraphrased from In re Nat’l Football League’s Sunday Ticket Antitrust Litig., 933 F.3d 1136 (9th Cir. 2019).
[2] U.S. v. NFL, 116 F. Supp. 319, 330 (E.D. Pa. 1953).
[3] 15 U.S.C. § 1291.
[4] In re Nat’l Football League’s Sunday Ticket Antitrust Litig., 933 F.3d 1136 (9th Cir. 2019).
[5] Fraser v. MLS, LLC, 284 F.3d 47 (1st Cir. 2002)
[6] See Christopher R. Deubert & Brandon Wurl, Major League Soccer at Twenty-Five: Legal and Financial Considerations for the Next Quarter Century, 12 Ariz. St. Univ. Sports & Ent. L. J. 1, 13-25 (2022).
[7] Am. Needle, Inc. v. NFL, 560 U.S. 183, 202 (2010) (quotations and citation omitted).
[8] NFL v. Ninth Inning, Inc., 141 S.Ct. 56, 57 (2020).
