The Franchise Memorandum

The United States District Court for the Northern District of Illinois has paved the way for what will be a closely-watched antitrust trial in American Needle, Inc. v. New Orleans Saints, 2014 U.S. Dist. LEXIS 47527 (N.D. III. Apr. 4, 2014). As reported in Issue 131 of The GPMemorandum, the United States Supreme Court in 2010 allowed plaintiff American Needle, an apparel manufacturer, to allege that the National Football League and thirty of its teams conspired, in violation of Sherman Act Section 1, to award Reebok an exclusive apparel license to make hats for all NFL teams. In a decision that could have meaning to franchise systems and product distribution networks of all kinds, the Supreme Court did not agree with the NFL's defense that it and its teams were a single entity incapable of conspiring in violation of Section 1. The case was sent back to the district court for further proceedings.

On remand, the district court rejected American Needle's request to apply a "quick look" analysis to the licensing arrangement and to dismiss the claims. The district court held, instead, that a full trial will be required to judge whether the procompetitive effects of the arrangement justify the exclusion of other suppliers such as American Needle. The court also declined to grant summary judgment to the NFL on its argument that American Needle's proffered relevant market is overly narrow, holding that proof of actual detrimental effects in the marketplace can obviate the need for an inquiry into market power and definition. Further, the court alternatively held that American Needle's evidence supported a submarket for the "wholesale market for NFL trademarked hats."

We will continue to monitor and report on any judicial developments in this case that are relevant to product distribution systems or franchising.