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NFL Antitrust: What it Means for the Sports Video Game Industry

EA’s exclusive NFL license agreement could potentially be in jeopardy if apparel manufacturer American Needle Inc. has their way. Sure, it seems odd that something that has nothing to do with video games could affect them in such a large way, but it is true.

Facts

The licensing issue that will be before the Supreme Court deals with whether or not the NFL, the NFL Properties division and Reebok have violated the Sherman Antitrust Act, 15 U.S.C.S. SS 1-2.

American Needle Inc. is a former business partner of the NFL and the NFL Properties. For the past 20 years, the vendor produced headgear based on licensing agreements with the league. In 2000, The NFL and NFL Properties agreed to solicit bids from many equipment vendors for an exclusive license for headgear. Reebok won the bidding, and in 2001, Reebok became the exclusive vendor for headgear in the NFL. American Needle then filed an antitrust action against the NFL, NFL Properties, Reebok and a few individual teams, including the New Orleans Saints and Detroit Lions.

American Needle Inc. claim that granting an exclusive license is conspiring to monopolize because "each of the individual teams separately owned their team logos and trademarks," according to U.S. 7th Circuit Judge Michael Kanne. In addition, "their collective agreement to authorize NFL properties to award the exclusive license to Reebok was, in fact, a conspiracy to restrict other vendors’ ability to obtain licenses for the teams’ intellectual property."

The U.S. Court of Appeals for the 7th Circuit affirmed a lower court’s summary judgment, agreeing that the NFL and the defendants did not violate antitrust law sections 1 and 2.

Now, summary judgment is granted "when there are no genuine issues of material fact, and thus the judge can decide the case without conducting a full trial by simply applying the law to the undisputed facts" (Sharp, 2007).

As of now, under past precedents set and the antitrust act itself, the NFL is free from any antitrust violations. The result of these rulings is that the NFL can continue to grant EA their exclusive NFL license.

 


There is the possibility Madden might not be exclusive anymore...but it's only a slight chance.

The Reasoning: Why is the NFL Free From Antitrust Violation?

The Sherman Antitrust Act of 1890 prohibits concerted action by two or more parties that unreasonably restrains trade in a "relevant market."

Both the district court and the U.S. Supreme Court have reasonable evidence that the NFL is acting as one single economic entity -- the affiliated teams of the league, plus the owners and players, are also considered as part of this single entity in certain circumstances such as this case.

Furthermore, the league and the teams are acting together. They are both guided by the league body when negotiating intellectual properties. By doing so, there is no deprivation of competition in the market.

The NFL is free to choose which company they grant their license to -- even if it applies to the entire league. In general, The courts approve and support strong business models and practices. There is no wrongdoing here in the eyes of the law.

The NFL relied on precedents set by the Copperweld Corp. v. Independence Tube Corp. case of 1984. In this case, the Supreme Court agreed that "a parent corporation and its wholly owned subsidiary are a single-entity for antitrust purposes."

The NFL asserted that they "functioned as a single-entity when collectively promoting NFL football by licensing the NFL team’s intellectual property and were thus immune from liability under section 1," according to Judge Kanne.

The Supreme Court has asserted in the past that even though teams may compete with intellectual property sales, it does not keep the teams from acting as a single-entity; and although the teams compete on the field, they rarely compete in the marketplace.

Based on this idea, there is no deprivation of competition in the market and therefore no antitrust violations took place.

What Does It All Mean?

American Needle Inc. is challenging the foundation of the NFL’s licensing business practices by claiming "each of the individual teams separately owned their team logos and trademarks."

If this argument wins out, it would mean that each team would hold the exclusive rights to their own trademarks, logos and other properties because each team would be considered an independent entity. There would no longer be exclusive rights granted for NFL video games either -- or third-party exclusivity when it comes to baseball.

Instead of creating a bidding war and rewarding one publisher (currently EA Sports), the NFL Properties division would not be able to package the league license as a whole anymore.

Each separate team would have the ability to act freely as a separate entity or business. For example, each team would be able to grant licenses to different apparel companies, such as Nike, Reebok, Adidas, Under Armour and many more.

This would also mean that a huge variety of football games could potentially be back on the market. More importantly, teams could demand a separate asking price for their properties before they are represented in games like Madden, NFL 2K and so forth.

Publishers would then be bidding and fighting over which teams they can sign to their game. We could end up with Madden featuring the NFC teams and 2K Football featuring AFC teams. Since the NFLPA would still hold the rights to players, there could potentially be a scenario where Tom Brady is in a game, but the New England Patriots logos are not.

Wrap-Up

A ruling in favor or American Needle Inc. does not mean that all professional sports leagues would now be required to sell licenses to gaming companies in the same manner.

The Supreme Court has asserted that they shall view each professional sports league one case at a time and each league facet at time.

With the NFL’s collective bargaining agreement up for negotiation this year, this would be an ideal time to restructure the NFL Properties and licensing deals amongst the 32 league owners.

It is possible that the NFL could negotiate a way to collectively sell their intellectual property to gaming publishers as a whole while still avoiding antitrust violations; that is the beauty of a collective bargaining agreement –- key word "agreement." The hard part would be to prove that there is no economic deprivation to consumers or to the marketplace.

The NFL Shield can sell itself. However, match it with EA Sports, John Madden and the fact that there are no other NFL games on the market, and some would consider that there is unfair dominance in the video-game marketplace.


Works Cited

Sharp, (2007). Sport Law A Managerial Approach.
Scottsdale, Arizona: Holcomb Hathaway Publishers, Inc.

Read the 7th Circuit Decision here [PDF]


Madden NFL 10 Videos
Member Comments
# 1 SageInfinite @ 04/13/09 10:37 AM
I like the fact that there could be more NFL games on the market. What I don't like is that each team could end up possibly not in the game. Good article.
 
# 2 ScoobySnax @ 04/13/09 11:51 AM
Quote:
Originally Posted by Timmay
Ditto.

Even if I have to put up with teams missing.

I'd be willing to play an NFL game with 12 teams if it meant I could play NFL 2kx
Sorry, but I HAVE to have all 32 teams.

The thing I hate about the NFL are the deals with the broadcasting. People pay 75-150 dollars/month on cable and cannot even get the channels that should be somewhat of a standard (NFL Network) and Sunday ticket should be available to all companies. They'd rake in alot more cash that way. That's the whole purpose right?
 
# 3 SageInfinite @ 04/13/09 12:05 PM
Quote:
Originally Posted by xxplosive1984
Sorry, but I HAVE to have all 32 teams.
Same here. There's no reason we shouldn't have a game with all the NFL teams and players in this day and age.

Also, of course I'd be open to NFL2K**, but given the current performance of the 2k titles, I wouldn't be ready to jump for joy. I'm just happy to see EA getting back on track, because right now that's all we have.

Also I wonder how this would effect the NCAA football license? Would they have to give up the exclusive rights as well?
 
# 4 DubTrey1 @ 04/13/09 12:05 PM
As much as I wold love more NFL games available to us the consumer, I would definately not like a game with teams missing. However, in the same vain - If the only option is one game with all teams that is subpar, then I would not buy it anyway.... Seems like a lose lose situation in that regard.
 
# 5 J-Unit40 @ 04/13/09 12:27 PM
Quote:
Originally Posted by Steeler99
Without ALL 32 teams, I wouldn't pay $1 for it .... what's the point? I'm a franchise player so all teams are required.
Exactly. What would be the point without all 32 teams?
 
# 6 CreatineKasey @ 04/13/09 12:29 PM
^^^

LOL at poster above me! (Edit: I was talking about 2krules' post about not liking half the teams)

Yes, I'd be overjoyed if this took the exclusive license away from video games. I want heavy competition everywhere. I want 4 football games to choose from. I want 3 baseball games to choose from... I want OPTIONS! I'd rather argue about which game is better than argue what goes into the single option.
 
# 7 thudias @ 04/13/09 12:31 PM
This is the only thing i disagree with

"With the NFL’s collective bargaining agreement up for negotiation this year, this would be an ideal time to restructure the NFL Properties and licensing deals amongst the 32 league owners." This is not the ideal time for owners to has out there differences with each other.

First and foremost they need to work out a deal with the players union. All other matters need to be tabled for future discussions NFL and NFLPA CBA is the number 1 issue today and should not be combined with any other issues.

There is no tie in between these two issues they are seperate and should be treated separately.
 
# 8 ngoulding @ 04/13/09 12:32 PM
One thing to note is what happens if Goodell follows throughwith his plan to expand globally. This case is almost certain to fail but in the EU its a different story. If the NFL expanded to include teams in London, Berlin and Amsterdam for instance the EU commission would likely come down very hard on EA for its anti-competitive practises. For anyone who doubts the far stricter approach in Europe just ask Microsoft.
 
# 9 tonnyrat @ 04/13/09 12:40 PM
Those of you who are complaining about missing teams, what if the games came out with an editor similar to the one found in Winning Eleven.

The English Premier League has an exclusive deal with EA, Konami only has the ability to license 2 English clubs per game. They counteract that by offering an in-depth editor which allows us (the community) to fix/add the missing teams. It isn't like the game will ship with less than 32 teams. The non-licensed teams will have identifiable names and colors. With Winning Eleven, it usually takes a week for someone to release a fully updated file.

Imagine, with a 2K Share-like system, both EA and 2K sports would be able to offer incomplete products (a worst case scenario) where the end user could potentially 'fix' the official team names and uniforms.

Keep in mind that the game would need the NFLPA license for the players. WE has real players on fake teams mimmicing their real-life counterparts. This means a lot less work for us since players can be modeled correctly. The only thing missing is a few logos, color scheme and team name. Only issue here is the stadium, but I think we can live with that.
 
# 10 Cryolemon @ 04/13/09 12:43 PM
Quote:
Originally Posted by tonnyrat
Those of you who are complaining about missing teams, what if the games came out with an editor similar to the one found in Winning Eleven.

The English Premier League has an exclusive deal with EA, Konami only has the ability to license 2 English clubs per game. They counteract that by offering an in-depth editor which allows us (the community) to fix/add the missing teams. It isn't like the game will ship with less than 32 teams. The non-licensed teams will have identifiable names and colors. With Winning Eleven, it usually takes a week for someone to release a fully updated file.

Imagine, with a 2K Share-like system, both EA and 2K sports would be able to offer incomplete products (a worst case scenario) where the end user could potentially 'fix' the official team names and uniforms.

Keep in mind that the game would need the NFLPA license for the players. WE has real players on fake teams mimmicing their real-life counterparts. This means a lot less work for us since players can be modeled correctly. The only thing missing is a few logos, color scheme and team name. Only issue here is the stadium, but I think we can live with that.
Exactly. That's exactly how it would work. Which, while not ideal, is a good idea.
 
# 11 sportzbro @ 04/13/09 12:49 PM
Interesting article, but a game without all the teams would suck
 
# 12 djordan @ 04/13/09 12:57 PM
You guys may like the idea but there are more casual fans out there.

They wouldn't buy the game knowing there is only half the teams available.

Think outside the box lol
 
# 13 tonnyrat @ 04/13/09 01:10 PM
Quote:
Originally Posted by djordan
You guys may like the idea but there are more casual fans out there.

They wouldn't buy the game knowing there is only half the teams available.

Think outside the box lol
Winning Eleven sells pretty well and they have a bunch of non-licensed teams in the game...

Given the existence of 4 major English clubs, 2 are left out (in other words: UNLICENSED) every year. That means instead of having Chelsea and their official uniform, you have a team called East London Blue. The team isn't MISSING, it is unlicensed. It exists. The players on the team are the real players in real life. The formation and tactics they use are based off of the real team.

Instead of having the NY Jets, you could have the NY Planes. A team with a generic green/white color scheme as a uniform. You would still have the real players though.

An editor could remedy this problem. Like I said, Winning Eleven hasn't had problems with casual fans.
 
# 14 Cryolemon @ 04/13/09 01:20 PM
Quote:
Originally Posted by djordan
You guys may like the idea but there are more casual fans out there.

They wouldn't buy the game knowing there is only half the teams available.

Think outside the box lol
You telling me that Winning Eleven has no casual soccer fans buy it lol? No one is saying make a game with only 16 teams. They are saying make the other 16 generic and let people edit them. IIRC this doesn't effect the players association license necessarily, so they'd even have the players, just not the team logo, full name or stadium.
 
# 15 roadman @ 04/13/09 01:27 PM
Isssh.

I received an headache just reading all that.

I like more games on the market, but not at the expense of editing teams names, players, jerseys, socks, cleats, and headgear.

I just don't have time for all that.

I wouldn't buy football games anymore.
 
# 16 elgreazy1 @ 04/13/09 01:58 PM
This is an ongoing situation I've been following for quite some time.

Yes, I'm more of a fan of 2K football games, but that's not to say I'm a "fanboy". Simply put, I will buy & play the BEST TITLE for a sports game, whether that be Madden, Blitz, APF, Back Breaker, Tecmo, etc. For EA to buy up exclusive licensing in the manner in which they did (NFL, AFL, NCAA football & ESPN) goes to show how desperate they were to monopolize & put a strangle-hold on the football gaming market. Instead of showing up to play, they took the ball home & locked the gates up to the field.

When there is no competition, there is no strive for excellence. In this case of football gaming, we, as fans, lose because there is no competition. The next-gen Madden titles have been under-whelming to say the least, and I believe it's simply because they've had no reason to work hard anymore.
 
# 17 buzzguy @ 04/13/09 02:10 PM
Some of you guys are spoiled! I remember the dark days of sports gaming (early 90's) when we were lucky to get either: A) real players or B) real teams. Not both!
Ha! You kids these days!
 
# 18 coogrfan @ 04/13/09 02:16 PM
Quote:
Originally Posted by elgreazy1
This is an ongoing situation I've been following for quite some time.

Yes, I'm more of a fan of 2K football games, but that's not to say I'm a "fanboy". Simply put, I will buy & play the BEST TITLE for a sports game, whether that be Madden, Blitz, APF, Back Breaker, Tecmo, etc. For EA to buy up exclusive licensing in the manner in which they did (NFL, AFL, NCAA football & ESPN) goes to show how desperate they were to monopolize & put a strangle-hold on the football gaming market. Instead of showing up to play, they took the ball home & locked the gates up to the field.

When there is no competition, there is no strive for excellence. In this case of football gaming, we, as fans, lose because there is no competition. The next-gen Madden titles have been under-whelming to say the least, and I believe it's simply because they've had no reason to work hard anymore.
So because you're unhappy with the state of football video games, you would be in favor of a Supreme Court ruling that would effectively tell sports leagues that they do not have the right to market their intellectual property rights as they see fit?

You guys really need to think about the larger ramifications of a win by American Needle. There's a lot more at stake here than just NFL 2k__.
 
# 19 noplace @ 04/13/09 02:18 PM
I hope this happens. I have not been able to enjoy football gaming since 2k5. EA can still do what they do but let 2ksports & others into the market. Its not like many EA fans are going to switch up anyway, regardless of what EA puts out they will buy it.
 
# 20 XtremeDunkz @ 04/13/09 02:23 PM
Quote:
Originally Posted by elgreazy1
This is an ongoing situation I've been following for quite some time.

Yes, I'm more of a fan of 2K football games, but that's not to say I'm a "fanboy". Simply put, I will buy & play the BEST TITLE for a sports game, whether that be Madden, Blitz, APF, Back Breaker, Tecmo, etc. For EA to buy up exclusive licensing in the manner in which they did (NFL, AFL, NCAA football & ESPN) goes to show how desperate they were to monopolize & put a strangle-hold on the football gaming market. Instead of showing up to play, they took the ball home & locked the gates up to the field.

When there is no competition, there is no strive for excellence. In this case of football gaming, we, as fans, lose because there is no competition. The next-gen Madden titles have been under-whelming to say the least, and I believe it's simply because they've had no reason to work hard anymore.

so much wrong with this argument but I refuse to beat the dead horse.
 

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