Supreme Court Takes a Pass on Early Review of Antitrust Challenge to NFL Sunday Ticket

18 November 2020 Legal News: Sports & Entertainment Publication
Authors: James T. McKeown Philip C. Babler

On November 2, the United States Supreme Court refused to weigh in on an ongoing antitrust challenge to NFL Sunday Ticket, the satellite broadcast package from DirecTV that gives NFL fans access to all NFL games each week.  The NFL had asked the Court to review a federal appellate court decision that would allow DirecTV consumers, led by San Francisco bar Ninth Inning, Inc. (d/b/a The Mucky Duck),  to proceed with their antitrust lawsuit in federal court. The Court refused to hear the case, but its decision does not mark ultimate victory for Ninth Inning.  As Justice Kavanaugh explained, the procedural context mattered both in the Ninth Circuit’s decision and in the Supreme Court’s decision not to review the case now.  The NFL may not have scored on its first possession, but much of the litigation remains.  

Background 

Television coverage of NFL games has evolved from humble beginnings in the early 1950s with only a handful of NFL games broadcast to today’s network coverage not only on Sunday afternoons but also on Sunday, Monday, and Thursday nights. Rather than individually negotiate with networks on broadcast rights, the NFL teams pool their television rights as authorized by Congress in the Sports Broadcasting Act (“SBA”).  For nearly 50 years, the SBA has protected the pooled network broadcasting agreements from antitrust scrutiny by providing an exemption for agreements relating to “sponsored telecasting” of games of “organized professional team sports.”   But Congress enacted the SBA before technology moved beyond over-the-air television and to include the form of cable and satellite broadcasts that now gives fans new ways to watch NFL games, including, e.g., the all-game access offered through DirecTV’s NFL Sunday Ticket package.  

The Mucky Duck, another bar, and two individual Sunday Ticket subscribers (“Plaintiffs”) sued DirecTV and the NFL and its teams, arguing that the NFL’s agreement to sell games through DirecTV violated the antitrust laws.  Plaintiffs contend that, absent the DirecTV agreement, individual teams would license broadcast rights to their games and that would result in greater output, with more telecasts available to more viewers at lower prices through additional distribution channels (other networks, cable, satellite, or internet carriers).  The district court granted the NFL’s motion to dismiss, finding that Plaintiff’s complaint did not state an actionable legal claim.  The United States Court of Appeals for the Ninth Circuit reversed and held that “at this preliminary stage, Plaintiffs have stated a cause of action for a violation of Sections 1 and 2 of the Sherman Act that survives a motion to dismiss.” 

The Ninth Circuit first concluded that the Sports Broadcasting Act did not exempt the NFL from the antitrust laws because the SBA did not apply to paid cable and satellite broadcasts.  At least at the motion to dismiss stage, the NFL did not contend otherwise.  Turning to the merits, the Ninth Circuit concluded that the complaint alleged a restriction on the output of television broadcasts of professional football similar to the restriction on college football broadcasts that the Supreme Court found illegal in NCAA v. Board of Regents, 468 U.S. 85 (1984).  The court rejected the NFL’s argument that Plaintiffs failed to allege an injury to competition because the broadcast packages required the joint action of the teams to produce games and could only be created by cooperation among the teams.  Relying on American Needle, Inc. v. NFL, 560 U.S. 183 (2010), the court concluded that copyrights to broadcasts, like trademarks, could be separately owned and licensed by teams.  The Ninth Circuit also rejected the argument that the complaint failed to allege market power in a plausible relevant market, concluding that “professional football games have no substitutes.”  

The NFL’s Petition to the Supreme Court

The NFL asked the Supreme Court to review the case.  The NFL first argued that the court of appeals had applied the wrong standard for antitrust claims involving joint ventures that jointly produce and distribute a joint product.  As the NFL noted, the football games and season could not exist without the cooperation among the teams to create the NFL product. The NFL also argued that fans and bars were “indirect purchasers.”  That is to say, fans do not purchase products directly from the NFL or its teams but rather through DirecTV.  Typically, indirect purchasers do not have standing to seek damages for a violation of the federal antitrust law.  

What Lies Ahead – The Importance of Procedural Context  

The Supreme Court denied the NFL’s petition for a writ of certiorari.  But Justice Kavanaugh, a noted sports fan, explained in an accompanying statement that the Supreme Court’s refusal to hear the case now should not be read as the Supreme Court agreeing with the analysis in the Ninth Circuit decision.  Significantly, on a motion to dismiss the court must assume the facts alleged by plaintiffs are true.  Justice Kavanaugh noted that the Supreme Court is less likely to accept cases decided at the motion to dismiss stage and before discovery and further factual development has occurred.  The Ninth Circuit did not decide that the NFL agreement with DirecTV violated antitrust law; rather, the court merely stated that plaintiffs alleged facts sufficient to state a claim and let them proceed with their lawsuit.  After the evidence is submitted, the NFL may prevail at summary judgment or trial.  

One puzzling point that remains is the Ninth Circuit’s statement that “professional football games have no substitutes,” a conclusion that the court attributes to L.A. Memorial Stadium Comm’n v. National Football League, 726 F.2d 1381 (9th Cir. 1984).  Defining a relevant market is usually a question of fact and the L.A. Memorial Stadium Comm’n decision came after a trial on the merits and not on a motion to dismiss.  Other federal appellate courts, including those examining NBA broadcasts and NASCAR events, recognized that markets may be broader than the individually challenged sport and acknowledged the need to examine the facts and economic evidence.  Perhaps the Ninth Circuit decision merely failed to link its language about relevant market to the procedural context, but the issue of relevant market – and what substitutes may exist for the broadcast of NFL games – will need to be addressed on remand to the district court. 

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