Consumers Have Standing to Challenge NFL Licensing Agreements

The US District Court for the Northern District of California has denied a motion to dismiss sought by the NFL, NFL Properties, and individual NFL teams in a putative class action lawsuit challenging exclusive licenses granted to Reebok on behalf of a putative class of consumers.1 The NFL challenged the complaint on the grounds that the plaintiffs had failed to allege a proper relevant market, lacked antitrust standing, and failed to state a claim for relief. The court held, for the purposes of the motion to dismiss, that the plaintiffs adequately alleged that they had paid supra-competitive prices for licensed apparel containing the logos of the NFL and its teams, relying on the standing factors articulated by the Supreme Court in Associated General Contractors (AGC).2 The court also held that the plaintiffs had adequately alleged a relevant market in the markets for licensing of trademarks of the NFL and its teams and for the retail market for apparel bearing those trademarks. Finally, the court held that the plaintiffs had sufficiently alleged a cause of action under both federal and California laws to survive a motion to dismiss.

This case was filed following the Supreme Court’s decision in American Needle, Inc. v. National Football League.3 The Supreme Court there held that NFL teams, when acting together to negotiate a single licensing agreement, did not operate as a single entity but rather were separate economic actors and were capable of conspiring unlawfully in violation of federal antitrust laws.4 The plaintiffs in this case alleged that the NFL, its licensing arm NFL Properties, and the individual NFL teams granted an exclusive license to Reebok in 2000 to produce licensed apparel containing the trademarks of the NFL and its teams. The suit also alleged that prior to signing the Reebok license, the individual NFL teams competed against each other for the licensing of their own intellectual property. The plaintiffs argued that consumer purchasers paid an “anticompetitive overcharge” as a result of the exclusive license granted by the NFL and all its teams to Reebok.

The NFL and its teams collectively filed a motion to dismiss. The defendants primarily argued that the plaintiffs failed to allege a proper relevant market and that the plaintiffs lacked antitrust standing. The defendants argued that the proposed relevant market was improper because it consisted of a single brand – namely, that team trademarks and the NFL brand compete against the brands and trademarks of other sports leagues or apparel creators, but that NFL teams’ trademarks do not compete against each other. As to the plaintiff’s antitrust standing, the defendants claimed that the plaintiffs did not participate in the allegedly restrained market for licensed apparel.

The court rejected both of these arguments. The court first addressed the defendants’ relevant-market argument and found that because the market allegedly consisted of trademarks for all NFL teams, the allegations were not of a single-brand market. The court relied on a lower court decision in American Needle5 which found, on similar facts, that “we are not considering whether headwear and apparel carrying one NFL team’s logo constitutes its own market, we are considering whether, as a matter of law, all headwear and apparel carrying NFL team logos cannot constitute a market unto itself.”6 The court in this case found that, unlike cases in which it was found that trademarks were used to identify the origin of a product,7 the trademarks here “may very well be the products themselves that consumers seek to purchase.”8 Moreover, the court found that NFL teams compete among themselves for sales of their trademarks (i.e., their trademarked apparel), especially in regions of the country where NFL fans do not have a local team or where geographic regions contain multiple teams. At the same time, NFL teams do not primarily compete for sales of trademarked apparel with the teams of other sports or with fashion brands. Therefore, a market of NFL teams’ trademarks could constitute a single market.

The court also rejected the defendants’ argument that the plaintiffs lacked antitrust standing. It followed the factors determined by the Supreme Court in AGC, including: “(1) the nature of the plaintiff’s alleged injury; that is, whether it was the type the antitrust laws were intended to forestall; (2) the directness of the injury; (3) the speculative measure of the harm; (4) the risk of duplicative recovery; and (5) the complexity in apportioning damages.”9 The bulk of the court’s analysis focused on the first AGC factor. The court first held that the plaintiffs had properly alleged standing in the retail market for NFL team licensed apparel because the plaintiffs were purchasers of licensed items within that market.

The court also found that the plaintiffs had alleged standing in the market for the licensing of NFL intellectual property for use in apparel. The plaintiffs did so by alleging that it met the “narrow exception” that grants standing to certain indirect purchasers in the alleged relevant market.10 The “narrow exception” grants antitrust standing to plaintiffs “whose injuries are ‘inextricably intertwined’ with the injuries of market participants” or “with the injury the conspirators sought to inflict.”11 The plaintiffs alleged that they paid higher prices for trademarked apparel because the supra-competitive royalty rates were passed on to consumers in the form of higher prices. The court relied on a number of 9th Circuit cases which had found that end-consumers had alleged antitrust standing to bring claims of price-fixing in upstream product markets. The court also noted that in this case, the licensed trademarks “may very well be the products purchased themselves,” and that for many consumers “an item of clothing not displaying an NFL team’s logo would not be an appropriate substitute.”12 Therefore, once competition ceased in the market for licenses for NFL teams, the supra-competitive royalty rates that the teams gained by collectively signing a licensing agreement were passed on to the consumers who purchased apparel featuring those trademarks.

The court noted that whether the plaintiffs suffered antitrust injury is the most important of the AGC factors. It then determined that no other AGC factors mitigated its finding that the plaintiffs had shown antitrust standing. Most notably, it found that the plaintiffs in this case was not seeking duplicative recovery (to the recovery being sought in the similar case American Needle), in contravention of the fourth AGCfactor. The court found that the plaintiff in American Needle was seeking lost profits for being excluded from the market for manufacturing licensed NFL apparel, while the plaintiffs in this case was seeking damages from the supra-competitive prices paid by consumers purchasing licensed apparel.13

This decision, to the extent applicable in other contexts, represents a broader means for plaintiffs to allege antitrust standing in markets in which they are not direct participants. Plaintiffs, especially indirect purchasers of allegedly price-fixed goods, may be encouraged to use the arguments made by the plaintiffs in this case to bring complaints in cases in which they are not direct participants, and that may increase the exposure of defendants to damages or other relief sought by both direct and indirect purchasers.

Endnotes    (↵ returns to text)
  1.  Dang v. San Francisco Forty Niners, et al., 12-cv-05481, Order Denying Defendants’ Motion to Dismiss (N.D.Cal., August 2, 2013).
  2. Associated Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpenters, 459 U.S. 519 (1983).
  3. 560 U.S. —, 130 S.Ct. 2201, (2010).
  4. The Supreme Court remanded the case, which is ongoing and involves a plaintiff seeking lost profits resulting from the NFL’s and its teams’ exclusive licensing agreement with Reebok. See American Needle, Inc. v. New Orleans Louisiana Saints et al., No. 04-7806 (N.D. Ill.).
  5. 385 F. Supp. 2d 687 (N.D. Ill. 2005).
  6. Id. at 695.
  7. See Mozart Co. v. Mercedes-Benz of N. Am., Inc., 833 F.2d 1342 (9th Cir. 1987).
  8.  Dang v. San Francisco Forty Niners, et al., 12-cv-05481, Order Denying Defendants’ Motion to Dismiss (N.D.Cal., August 2, 2013).
  9.  Am. Ad Mgmt., Inc. v. Gen. Tel. Co. of Cal., 190 F.3d at 1054–55 (discussing AGC, 459 U.S. 519).
  10. See Am. Ad Mgmt., 190 F.3d at 1057 n.5.
  11.  Am. Ad Mgmt., 190 F.3d at 1057 n.5 (citing Blue Shield v. McCready, 457 U.S. 465 (1982) and Ostrofe v. H.S. Crocker Co., 740 F.2d 739, 745–46 (9th Cir. 1984)).
  12.  Dang v. San Francisco Forty Niners, et al., 12-cv-05481, Order Denying Defendants’ Motion to Dismiss (N.D.Cal., August 2, 2013).
  13.  Dang v. San Francisco Forty Niners, et al., 12-cv-05481, Order Denying Defendants’ Motion to Dismiss (N.D.Cal., August 2, 2013).
Joseph Adamson

Joseph Adamson