Section 1 Challenges to the Properties Arms of Sports Leagues: The Single-Entity Defense, Market Definition, and the Rule of Reason from Dallas Cowboys to American Needle and Beyond

Gregory Pelnar, May 27, 2009

The merchandising/licensing units of sports leagues have been challenged as violations of Section 1 of the Sherman Act in a series of lawsuits since the mid-1990s. The Dallas Cowboys, New York Yankees, and New York Rangers have all brought such actions against their respective leagues. The first two suits were settled, the third is ongoing. The Seventh Circuit’s recent American Needle decision is notable as the NFL’s motion for summary judgment was granted on the grounds that the league and its teams are a “single entity” with respect to the licensing of intellectual property. However, what constitutes a single entity is a hotly disputed subject which American Needle has petitioned the U.S. Supreme Court to address. This article discusses Section 1 challenges to the centralized exclusive licensing of league and franchise intellectual property, tests for identifying a single entity, and the rule of reason analysis of MLB Properties in Salvino. It concludes with some observations on issues raised in these Section 1 cases.

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