The Supreme Court recently ruled that the National Football League’s apparel contract with Reebok is subject to the Sherman Antitrust Act. Believe it or not, this ruling may affect your business.
The Plaintiff, an apparel company, sued the NFL alleging that the league’s apparel contract with Reebok violates the Sherman Antitrust Act. The Act provides that “[e]very contract… in restraint of trade or commerce… is declared to be illegal.” The antitrust laws are in place to encourage competition and protect against the creation of monopolies that harm the consumer.
The Court determined that the NFL’s teams should be considered separate entities for antitrust purposes, such that the apparel company can proceed with its lawsuit. Since each NFL franchise is competing against the others, not only on the field but in terms of apparel sales, the NFL’s apparel contract with Reebok is subject to the Sherman Antitrust Act. Note that the Court was only ruling on whether the case should be allowed to go forward, not whether the contract actually violates the Act.
Many of our clients are members of trade associations or other organizations consisting of separate businesses coming together to work towards a common goal. Like the NFL’s apparel contract, contracts entered into by these organizations can be subject to antitrust laws.
(For example, consider a situation in which a group of suppliers agrees that it will not sell materials to a particular business or group of businesses). Although the group may be acting in the best interest of their businesses, such an agreement may violate state or federal antitrust laws, and the group could be subject to substantial fines and other penalties.
As a member of a trade association, it is important to understand that these laws exist. If you are concerned about any of the contracts entered into by your organization or any contracts currently being considered, it may be a good idea to have them reviewed by your attorney.