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NATIONAL FOOTBALL LEAGUE ET AL. v. NORTH AMERICAN SOCCER LEAGUE ET AL.

December 6, 1982

NATIONAL FOOTBALL LEAGUE ET AL
v.
NORTH AMERICAN SOCCER LEAGUE ET AL.



C.A. 2d Cir. Reported below: 670 F.2d 1249.

[ 459 U.S. Page 1074]

Certiorari denied.

JUSTICE REHNQUIST, dissenting.

This lawsuit is an attack under § 1 of the Sherman Act, 26 Stat., as amended, 15 U.S.C. § 1, by the North American Soccer League and most of its member teams (NASI) on the cross-ownership rule imposed by the National Football League (NFL) on the owners of its member teams. The rule, in essence, prohibits NFL owners from obtaining a controlling interest in any other major league professional sports team. The Court of Appeals found that the rule violates § 1 under the Rule of Reason, and enjoined the NFL from enforcing it.

[ 459 U.S. Page 1075]

     The NASL's complaint alleged that the cross-ownership rule excludes it from a substantial share of the market for "professional sports capital and entrepreneurial skill." The NFL contended that the relevant market was for capital generally, and that the rule does not exclude anyone from a significant share of the capital market. The District Court decided that the relevant market is in between -- a market for "sports capital" -- but did not define precisely the extent of this market. It then decided that any competition between the NFL and the NASL in that market is competition between two single economic entities. 505 F. Supp. 659 (SDNY 1980). It thus held that § 1 of the Sherman Act does not apply because the NFL is a single economic entity that cannot combine or conspire with itself. Id., at 689.

 The Court of Appeals rejected this view. 670 F.2d 1249 (CA2 1982). It thought "[t]he characterization of NFL as a single economic entity does not exempt from the Sherman Act an agreement between its members to restrain competition." Id., at 1257. See Perma Life Mufflers, Inc. v. International Parts Corp., 392 U.S. 134, 141-142 (1968); Timken Roller Bearing Co. v. United States, 341 U.S. 593, 598 (1951). The Court of Appeals thought the objective of the cross-ownership rule is to protect individual teams as well as the league from competition.

At this point, the Court of Appeals had dealt with the District Court's entire holding. The District Court expressly declined to consider whether the cross-ownership rule violates the Rule of Reason. 505 F. Supp., at 689. The application of the Rule of Reason is to be made by "the fact finder [who] weighs all of the circumstances of a case." Continental T.V., Inc. v. GTE Sylvania Inc., 433 U.S. 36, 49 (1977). See, e.g., Berkey Photo, Inc. v. Eastman Kodak Co., 603 F.2d 263, 302 (CA2 1979). The proper course for the Court of Appeals thus would have been to remand for findings by the District Court. However, it proceeded to decide the merits on its own.

[ 459 U.S. Page 1076]

     The Court of Appeals first decided that there is a market for "sports capital and skill," which is a submarket of the capital market. 670 F.2d, at 1260. "[A]n owner may in practice sell his franchise only to a relatively narrow group of eligible purchasers, not to any financier." Ibid. It did not define this market except to say that it is "not limited to existing or potential major sports team owners," but "is relatively limited in scope and is only a small fraction of the total capital funds market." Ibid. It is not clear whether the Court of Appeals was attempting to define the relevant market differently than did the District Court. If it was, it should have applied the clearly-erroneous standard to the District Court's finding rather than substituting its own judgment. Associated Radio Service Co. v. Page Airways, Inc., 624 F.2d 1342, 1348-1349 (CA5 1980); Martin B. Glauser Dodge Co. v. Chrysler Corp., 570 F.2d 72, 82, n. 18 (CA3 1977); Telex Corp. v. International Business Machines Corp., 510 F.2d 894, 915 (CA10 1975) (per curiam). See Pullman-Standard v. Swint, 456 U.S. 273, 287 (1982) .

The Court of Appeals then proceeded to apply the Rule of Reason. There is no dispute as to the proper statement of the Rule. "The true test of legality is whether the restraint imposed is such as merely regulates and perhaps thereby promotes competition or whether it is such as may suppress or even destroy competition." Chicago Board of Trade v. United States, 246 U.S. 231, 238 (1918).

On the basis of the facts as described by the Court of Appeals I seriously doubt whether the Rule of Reason was violated. The Court of Appeals held the cross-ownership rule is anticompetitive because it restricts the access of NASL teams to sports capital, and that this anticompetitive effect outweighs any procompetitive effects of the rule. It rejected the argument that the rule enables NFL owners to compete effectively in the entertainment market by assuring them of the undivided loyalty of fellow owners.

[ 459 U.S. Page 1077]

     I believe the Court of Appeals gave too little weight to the procompetitive features of the cross-ownership rule and engaged in excessive ...


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