John G. Roberts, Jr.: We will hear argument first this morning in Case 08-661, American Needle v. The National Football League. Mr. Nager.
Glen D. Nager: Thank you, Mr. Chief Justice, and may it please the Court: In this case, the Court of Appeals for the Seventh Circuit held that an agreement of the 32 teams of the National Football League was immune from any scrutiny under Section 1 of the Sherman Act on the ground that the agreement allegedly fails the plurality of actor requirement of this Court's jurisprudence. The 32 teams of the National Football League are separately owned and controlled profit-making enterprises. Under this Court's decision in NCAA, as well as the Court's more general joint venture jurisprudence, those clubs are entities whose distinct agreements are, indeed, subject to Section 1 scrutiny. The fact of the matter is there is a longstanding consensus, judicial and legislative, that agreements among sports teams about whether and how they will participate in the marketplace is subject to scrutiny under the Sherman Act, Section 1. The Court's decision in NCAA is most directly on point. In that case, the Court held that a policy of the NCAA that restricted the ability of member institutions of the NCAA to sell TV rights violated Section 1. Just as with the NFL, the decisions of the NCAA were ultimately controlled by the vote of its members, and for that reason, the Court held that the NCAA policy was a horizontal restraint.
Sonia Sotomayor: But there was no joint venture with respect to the television rights, meaning there was no separate activity, other than the televising of the shows at issue. Here, the Solicitor General is saying there is a joint venture, and it has to do with the licensing of trademarks, with their quality control, et cetera. Isn't that a substantial difference?
Glen D. Nager: No, I don't -- I don't think so, because what we are asking about here is -- is the question of whether or not the agreement of the teams involves a plurality of actors. And just as in NCAA, the members' institutions -- because they control the operation of the NCAA and the policy that it was promulgating, there was a plurality of actors. So, too, here, the 32 teams of The National Football League have entered into an agreement and control the use, collectively, of the trademarks and logos of the individual teams. And for that reason, there is concerted activity that is involved. Justice Sotomayor, the point that you raise might be of -- a point of difference that the NFL could argue in the context of an ancillary restraint analysis and the context of a rule of reason analysis, but it is not a point of distinction that they can argue properly in the context of the concerted conduct inquiry. The NCAA case simply applies the consistent teachings of this Court in cases like Sealy, BMI, and Copperweld, that separately owned and controlled entities entering into agreements, those agreements constitute concerted conduct subject to scrutiny under the antitrust laws.
Ruth Bader Ginsburg: Did that cover everything that the NFLA does? Because everything is subject to agreement, it's all concerted action, so is everything under the Sherman Act, and then it goes to rule of reason analysis? Or are there some things that escape, entirely, antitrust analysis?
Glen D. Nager: Certainly everything in the -- that is challenged in this case, because this involves a restriction on the activities of the venturers themselves. But more generally, I would -- I would answer your question, Justice Ginsburg, to say that yes, that everything that these 32 separately owned and controlled teams joined together to do by -- in concert, by agreement, by consent, is a contract.
Anthony M. Kennedy: Changes in the -- in the rule apply? They make a change to make it -- give the passer more protection, but there's -- this really hurts certain teams, which mostly run, and so -- rule of reason?
Glen D. Nager: Yes, it is concerted activity. I don't think it would be a plausible rule of reason claim.
Anthony M. Kennedy: Well, how -- you know the litigation system. How do we know?
Glen D. Nager: Well, I think we know the following, Justice Kennedy: That under this Court's rule of reason's jurisprudence, a plaintiff has to be able to plead an identifiable anticompetitive effect in a market in which the defendant plausibly has market power, and the -- the plaintiff also has to be one who can--
Anthony M. Kennedy: Well, my -- my hypothetical: Two or three teams which aren't particularly popular in the league are hurt by the rule change. And notice -- notice, the owners sit around the room, they are liable for a conspiracy. I mean, this is serious stuff. Triple damages. I don't -- and my question, really, was the same as Justice Ginsburg. Can you give us a zone where we are sure a rule of reason inquiry will be -- would be inappropriate? We can take care of it on summary judgment. Because if you don't have some sort of Section 1 carveout for joint action, then -- then everything is under the rule of reason.
Glen D. Nager: --Well, Justice Kennedy, let me answer your question in two parts. First of all, to the extent that the Court is looking for a zone, the concerted conduct doctrine is the wrong place to do it, because remember, if something is deemed not to be concerted conduct, it is a per -- then it's per se, not subject to section 1 and per se legal. And I think for the Court's jurisprudence over the last 30 years, the Court has been trying to get out of per se rules and have a more focused inquiry into what the anticompetitive effects and procompetitive effects of a particular restraint are. The concerted conduct doctrine would be a very blunt tool to use for that purpose. Now, that is not to say -- and I appreciate your question -- in the NCAA case itself, where conditions of competition and the like were raised, Justice Stevens' opinion for the Court says that in contrast to the TV restraint, these other types of rules and regulations of the sports league are presumptively competitive, procompetitive, presumptively favorable to consumers, because they are integral and bound up with the creation of the football venture itself.
Samuel A. Alito, Jr.: Well, let me give you another example that you mention in your brief. The NFL teams agree among themselves regarding scheduling: They will play 16 games a year and they will have a playoff schedule and they won't play any other games. Now, would that be a clear case under the rule of reason? You mention and some of your amici mention that, for example, the English football leagues operate very differently.
Glen D. Nager: Justice Alito, if I -- I may not have gotten all of your question, but let me answer it in two parts. The antitrust laws do not require joint ventures to maximize output. They don't require joint ventures to maximize competition. They simply prohibit people entering into contracts from unreasonably restraining trade. So a mere agreement among the team owners that they would have a 14-game schedule rather than a 16-game schedule is not a prima facie showing of an anticompetitive impact, because all it's showing us is what the joint venturers have done with their own output. They have -- you haven't alleged a market-wide reduction in output. Now, if by your question you were saying in addition--
Samuel A. Alito, Jr.: Well, what if one of the team wants -- one of the teams wants to play additional games--
Glen D. Nager: --Well--
Samuel A. Alito, Jr.: --against a rival team where they will get more money?
Glen D. Nager: --What I -- what I was going to jump right to is: If in addition to changing the league schedule, the team owners in concert agreed to prohibit the teams of the National Football League from -- from playing any other games -- doing an exhibition game in Japan, the Redskins and the Giants playing another game -- that might show a market-wide reduction in output. And the Court's decision in NCAA says very specifically that the most important condition of ensuring the competitiveness of joint ventures is ensuring the freedom of the individual venturers to produce output, increase output. Now, that doesn't mean that a league rule of that type would be unlawful. All I'm trying to suggest is if in addition to changing the schedule of games for the league, they also imposed a restriction on the individual venturers from producing additional games on their own, we might have something that looked more like a plausible rule of restraint--
Sonia Sotomayor: They couldn't -- they couldn't stop that team from joining another league? Let's assume -- and I -- you know, I don't know enough about football, but let's assume there are two leagues playing. One of them plays on Saturday and the other plays on Sunday. You are suggesting that the joint venture couldn't stop their members from joining that other league? What's the purpose of being in a venture if -- if you are free to reject it and go to somewhere else?
Glen D. Nager: --What I'm saying is, first of all, it would plainly be concerted activity on the part of the team owners because they would have entered into a horizontal restraint on the activity of the venturers. Whether or not that horizontal restraint violated the antitrust laws, one would have to go through the following analysis, Justice Sotomayor: First, we would ask whether that restriction is an ancillary -- was an ancillary restraint. And an ancillary restraint, starting with Judge Taft, later Chief Justice Taft's, opinion in the Addison Pipe case, is: Is that restraint reasonably necessary to achieve the efficiency-enhancing purposes of the joint venture and is it no broader than necessary? And if it is, then we would analyze that restraint by reference to its own procompetitive benefits and anticompetitive effects; we would analyze it by reference to the benefits of the joint venture as a whole.
John G. Roberts, Jr.: Counsel, it seems to me -- your last few answers seem to me to beg the question. You start out by saying: Well, obviously it's a horizontal agreement among the teams, and then you explain how you are going to analyze it. I thought that was the very question before us: Whether these sorts of rules and regulations are horizontal agreements between the teams or whether they are part of a particular -- a single entities' articulation of rules.
Glen D. Nager: Well, Mr. Chief Justice, you are exactly right, and the real--
John G. Roberts, Jr.: That you have been begging the question? Is that -- it's that part? [Laughter]
Glen D. Nager: --Well, let me try to address Justice Sotomayor's subsequent question in the context of the way you are posing the question, Mr. Chief Justice. The reason it's a horizontal restraint is because these -- under the Court's doctrine, consistent teachings, whether it be Sealy, BMI, Copperweld, these teams are separately owned. They are separate decision-makers joining together, and they are making a decision about how they are going to jointly produce something or not produce something. And that's what makes it concerted activity under this Court's consistent teachings. The distinction between unilateral activity under section 1 and concerted activity under section 1 has consistently been the distinction between ownership integration of assets and contract integration of assets.
John Paul Stevens: Can I interrupt with this question? Is it not part of your burden not only to argue there are multiple actors, but also that their agreement has an adverse effect on competition?
Glen D. Nager: It -- absolutely, as the plaintiff in the case, Justice Stevens, that -- we do. That is not the ground of decision on the court below.
John Paul Stevens: I understand it isn't, but it is part of your burden to say this is not a procompetitive agreement.
Glen D. Nager: Absolutely. And I'm not--
Antonin Scalia: But not -- not here.
Glen D. Nager: --In the -- I'm sorry, Justice?
Antonin Scalia: Not here.
Glen D. Nager: I -- I don't have to argue -- I mean, I don't think I have to argue in this Court. I just have to answer your questions, but--
Antonin Scalia: If -- if we find for you and it goes back, then you would -- you would bear that burden.
Glen D. Nager: --That's correct. And in fact, in this case, Justice Stevens, I would point out that the NFL initially moved to dismiss the -- the rule of reason count on the ground that it didn't state a cognizable, plausible rule of reason, and the district court judge denied that motion. He found the complaint alleged a market in which he could not say as a matter of law that the NFL defendants did not have market power, and he recognized that the -- that the teams had agreed together to prohibit competition in an aspect of their licensing activity and in an aspect of their merchandising activity.
Antonin Scalia: How does it work?
John Paul Stevens: But what if he -- what if he further concluded that the agreement had the overall effect of stimulating additional -- it was procompetitive in that it would equalize the economic strength of the teams, and therefore made them all better competitors on the playing field? Would that have been a defense?
Glen D. Nager: I'm sorry, Justice Stevens, I'm not quite sure. But you are saying if in the response to a motion to dismiss he had -- he had held--
John Paul Stevens: Right. He said: Sure, there is an agreement here, but the burden is on the plaintiff to show that the agreement has an adverse effect on competition. And that the -- as I understand the facts, you've -- there is revenue sharing here, isn't there? That they -- they all share in the product of the sales of the joint product?
Glen D. Nager: --Well, let me explain what they've done, and I will then explain why it does have a -- identifiable anticompetitive effects, which certainly satisfy the pleading standards for a rule of reason claim. What the teams did here was they got together and they agreed that they would not, themselves, individually license their trademarks or logos. They agreed that they -- under -- the current market system included the issuance of market blanket licenses. They would eliminate all but one of those blanket licenses from the market and they would give it in the exclusive control of Reebok, and they would limit the circumstances in which they competed against each other and with Reebok, and said--
Stephen G. Breyer: But I thought -- I thought -- as I read your complaint, almost every word of it had to do with pro -- per se violations. So I forget those here, right?
Glen D. Nager: --The per se violation was dismissed and--
Stephen G. Breyer: You forget -- just yes or no. I forget it? Okay.
Glen D. Nager: --is not before the Court.
Stephen G. Breyer: Now, I've suddenly heard you talk -- the only thing left I could see was where you say by their agreement to grant an exclusive license to Reebok, they unreasonably restrained trade in the markets. That's what I'm supposed to focus on?
Glen D. Nager: No, no. What I would say--
Stephen G. Breyer: What other paragraph do you want me to focus on?
Glen D. Nager: --Well, what I would point you to is the statement -- I mean, if--
Stephen G. Breyer: No, I'm interested in the complaint at the moment.
Glen D. Nager: --What the complaint talks about is the granting of an exclusive license here.
Stephen G. Breyer: Yes. Okay. So I'm looking at the complaint.
Glen D. Nager: But the exclusivity as to--
Stephen G. Breyer: Fine. I get the point. I'm asking a question. And I just heard you say that you want, for example, were it -- you want the Patriots to sell T-shirts in competition with the Saints, or whoever. The Red Sox. All right. You see the point? The Red Sox -- I know baseball better. You want the Red Sox to compete in selling T-shirts with the Yankees; is that right?
Glen D. Nager: --The ability to compete. Yes.
Stephen G. Breyer: Yes. Okay. I don't know a Red Sox fan who would take a Yankees sweatshirt if you gave it away. I mean, I don't know where you are going to get your expert from who's going to say there is competition between those two products. I think they would rather -- they would rather wear a baseball, a football, a hockey shirt.
Glen D. Nager: I understand the -- the point.
Stephen G. Breyer: But you are going to go back and prove that actually there is competition between the--
Glen D. Nager: I understand the point you are making. I would also make the point that--
Stephen G. Breyer: --Yes. Is that what this case is about?
Glen D. Nager: --In part. But you've got to recognize what the competition is for. The competition is for fans. And the fact of the matter is, you're right that someone who has lived in New York City for a long time is unlikely to be a Red Sox fan and be easily be persuaded to be a Red Sox fan, but the person who is three years old can easily be persuaded.
Stephen G. Breyer: They have very small allowances at three years old. [Laughter] Why you think -- I guess you have a right to that. I'm not -- you have a right, but that's what you were going to try to have to prove: That they're--
Glen D. Nager: Well, but the other point I would make is--
Stephen G. Breyer: --Yes.
Glen D. Nager: --that's just showing that each team has substantial market power.
Stephen G. Breyer: Yes.
Glen D. Nager: And again, they--
Stephen G. Breyer: But I'm trying to look -- what I'm trying to get in my mind is what specific restraint you are focusing on. You listed three or four, and one of them is you want, in effect -- I'm joking about it, but it's true -- you are arguing that the Yankees should compete with the Red Sox in selling shirts. Another thing you are complaining about, which is the one I understand less, is that these teams got together and they agreed that they would just have one person sell all this stuff together. And what you think is that they individually should have decided whether to choose that one person, or maybe to choose two people, or three; is that right?
Glen D. Nager: --Not quite.
Antonin Scalia: Mr. Nager, do I have to figure this out here? Is--
Glen D. Nager: No.
Antonin Scalia: --Is this issue before us here? Or is it just the issue of whether the lower court was wrong to dismiss your suit on the basis that this is a unitary operation? I think that was the only issue.
Glen D. Nager: You're -- that is the only issue, Justice Scalia.
Antonin Scalia: Well, why am I worrying about this other stuff?
Glen D. Nager: Because Counsel has an obligation to respond to questions. [Laughter]
Stephen G. Breyer: I find--
Glen D. Nager: I appreciate Your Honor--
Stephen G. Breyer: --I find it easier--
Glen D. Nager: --You'd be a good blocker.
Stephen G. Breyer: --to think about the case if I know what's going on. And I'm not certain this is irrelevant, but given Justice Scalia's persuasive remark, I will withdraw my question. [Laughter]
Glen D. Nager: Thank you, Justice Breyer.
Anthony M. Kennedy: Well, but it seems to me what we are doing is exploring the consequences of completely discarding the unitary theory.
Glen D. Nager: Well, we're not--
Anthony M. Kennedy: And so -- and the earlier questions, it seemed to me, were helpful. The Saturday/Sunday scheduling issue, it seems to me, pretty clearly on its face does limit competition. You -- you have one day instead of two days. Then Justice Stevens said: Suppose it makes them better players because they are rested and so they can perform better. I take it that was the purpose of the question. And I -- I still don't get any answers. I don't know where we are with this.
Glen D. Nager: --The answer to--
Anthony M. Kennedy: And -- and it's a difficult area, but I would like -- and -- but I would like some guidance.
Glen D. Nager: --Well, the guidance I would give you, Justice Kennedy, is that as Justice Scalia says, the only question before the Court is whether or not these agreements constitute concerted activity. They plainly do, because they are agreements between separately owned and controlled competing businesses.
Ruth Bader Ginsburg: Mr. Nager, I think you answered my question originally: Yes, everything. Because they are separate entities, they agree on everything. There is agreement in every case, so there was nothing you would take outside, and you would put everything under the rule of reason analysis.
Glen D. Nager: That -- that is correct. But that doesn't mean that the rule of reason is some unstructured, indeterminate--
Ruth Bader Ginsburg: One -- one concern in the litigation is, you know, if it doesn't come under the Sherman Act at all, they go home after the case is dismissed on the -- on the pleadings. But once you say no, it's got to be a rule of reason analysis, then you have discovery, which can be costly. And I thought that that was a feature of this case, that the -- that the plaintiff wanted more discovery, and the court said: You've had enough.
Glen D. Nager: --Well, no. The -- the judge only allowed discovery on the single entity issue. He did not allow discovery on -- on the rule of reason question. So there's been -- not been -- discovery on the substance of the case has not been conducted. So in that regard, the question of how the case would be managed going forward is something that would be in the hands of the district court on remand from this Court and the court of appeals, after this erroneous conclusion that the agreements don't constitute concerted conduct is put to the test.
John G. Roberts, Jr.: Counsel, could you articulate for me as succinctly as possible the extent to which your position departs from the position of the Solicitor General?
Glen D. Nager: The Solicitor General's position is correct insofar as it criticizes the Seventh Circuit's reasoning. The test that the Solicitor General proposes is conceptually and doctrinally unsound, and it will create a lack of clarity where there presently exists clarity in the cases, and it will produce inefficiency and waste in the conduct of litigation that does not presently exist.
John G. Roberts, Jr.: Well, I would have thought it is just the transfer of the inefficiency and lack of clarity from the -- the first question to the rule of reason. I mean, I'm not quite sure it -- you don't have the same problem. It's just a question of where you want to rest the inefficiency and confusion.
Glen D. Nager: Well, I understand your point, Mr. Chief Justice: That to the extent that rule of reason inquiries are not as refined as they need to be, since the Solicitor General's concerted conduct inquiry includes rule of reason inquiries -- indeed, on its effective merger standard, it says it has to survive a rule of reason analysis or somehow be waived, or you would have to do it as part of the concerted conduct inquiry -- so that there is no doubt to the extent that -- that the rule of reason is a continuing project of this Court, we would be transferring some of that project into the concerted conduct inquiry. With all respect, Mr. Chief Justice, I don't think that would be a healthy development in the law. The courts actually understand the concerted conduct doctrine as it presently exists.
John G. Roberts, Jr.: Well, I -- I thought the purpose of their submission was to respond to some of the questions we've seen, like scheduling, like what the rules are going to be about -- about the game. There are some things that it just seems odd to subject to a rule of reason analysis. And you yourself have said: Well, that is going to be an easy case under the rule of reason. Why doesn't it make sense to sort of carve those out at the outset, rather than at the end of the case?
Glen D. Nager: Well, I think the answer is, you should -- you should use English language and doctrine to address the issue that you are actually trying to address, rather than call it something else. Right now we have an antitrust doctrine that says you've got to have concerted conduct and you have to have an unreasonable restraint of trade. We have courts that understand how to apply this Court's cases on concerted conduct. This Court is -- for understandable reasons, is sensitive to the fact that the rule of reason is not quite as well understood and is an evolutionary doctrine, perfectly well understood by me. There are certain issues that this Court has said come up in a rule of reason analysis, and to quote the Court from Cal Dental, "can be dealt with in the twinkling of an eye. " that is, some claims, as the NCAA Court said, are not going to be serious rule of reason claims and can be dismissed on the pleadings. The Court said that in Twombly as well.
John Paul Stevens: And as I understand your position, that could be the result in this case. We don't know whether the district court was right or wrong in what he did on the -- on the rule of reason issue.
Glen D. Nager: In terms of what this Court -- obviously, on my client's behalf, I have to vigorously state to the Court we think we have a bona fide, serious rule of reason claim -- but yes, Justice Stevens--
John Paul Stevens: And one thing I wondered about the record: There is discussion in the briefs about the fact that the teams share the revenues from these -- these sales. Is that -- how did that get in the record, the revenue sharing aspect of their -- of the different teams' participation?
Glen D. Nager: --Well, I -- I didn't handle the case below, so I don't quite know how it got into the record. It is my -- certainly my understanding that there is an affidavit in the record that says that the revenues that the NFLP entity receives are distributed to the teams in equal shares, so that that--
John Paul Stevens: Would -- wouldn't that -- that affidavit support the conclusion that this is basically a procompetitive agreement because it tends to make competition stronger on the playing field, and therefore, that's a sufficient defense under the rule of reason, and that's the end of the ball game?
Glen D. Nager: --I -- I think not. You have to remember that that agreement to not compete and have only one entity--
John Paul Stevens: Yes, but you are not just competing.
Glen D. Nager: --That is the very thing the case challenges.
John Paul Stevens: But with regard to sales of the paraphernalia and so forth that you have here, you are not just competing among the members of the League; you are competing in a market that includes all sports paraphernalia.
Glen D. Nager: No, our market was alleged and held not to be legally invalid by the district court, to be NFL-logoed hats and apparel.
John Paul Stevens: That assumes there is no competition between the sales of those logos and the sales of other sports logos.
Glen D. Nager: Well, that -- that's correct. And the district court judge held that that was a -- based upon this Court's decision in NCAA and the International Boxing case -- was a plausible market to allege in which the NFL teams had market power. And so it would be a question for the district court managing the case going forward to determine whether or not that was a factually supportable market.
Sonia Sotomayor: Counsel, you -- the Solicitor General is asking us to remand under his new test to find out whether you are challenging the joint venture or challenging simply the licensing to one individual or one entity. What are you doing? Do you have an answer to that?
Glen D. Nager: Well, the -- the answer is--
Sonia Sotomayor: Meaning -- I don't--
Glen D. Nager: --I understood -- that the American Needle said in the court below that what it was challenging was the grant of an exclusive license to NFLP that prohibited the individual team competition and it limited all competition in the market in blanket licenses. When the case came to this Court, on page 2 of the orange brief, the NFL said they understood exactly what our case was -- this is on page 2, the second sentence: "American Needle alleged that the decades-old agreement among the member clubs to collectively market such intellectual property was unlawful under Sections 1 and 2 of the Sherman Act, at least after the 2001 decision to collectively license the marks to a single headwear manufacturer. " The NFL stood -- understood exactly what we were arguing, and they have understood it throughout this case, as did the lower courts. I'm not quite sure why the Solicitor General doesn't understand it.
Ruth Bader Ginsburg: Is your point that your client wasn't hurt until they dealt exclusively with one manufacturer?
Glen D. Nager: That's correct, Justice Ginsburg.
Ruth Bader Ginsburg: So you have nothing -- you had no damages before?
Glen D. Nager: Before.
John G. Roberts, Jr.: Thank you, Mr. Nager. Mr. Stewart.
Malcolm L. Stewart: Mr. Chief Justice, and may it please the Court: I think that by focusing on a rather mundane aspect of the NFL commissioner's powers, this may help to explain why the United States is not four-square in support of either party's theory in this case. Among the powers that is vested in the commissioner by the NFL -- by the NFL constitution is the power to incur expenses to carry on the ordinary business of the League, and this includes renting office space, hiring employees, and procuring supplies. And if the commissioner, pursuant to that delegation of authority, decides from which company he's going to -- to acquire paper for the League's offices or decides what the weight scale for secretaries in the League offices should be, our view is that that's the conduct of a single entity. It may be that the commissioner's power to do those things is ultimately derived from the consent of the individual teams within the League, but once that consent has been given, once that authority has been centralized, then the commissioner's decision about a paper supplier or wages for employees--
Stephen G. Breyer: And then the question I have -- I now understand this much better in light of that. And -- but I don't -- and -- and I see your point. What I'm not certain about is: Is it better to characterize it as a single entity, in which case we get into the kind of confusion that I think exists in this case? Or just say: Look, it's a joint venture. If Panagra creates a joint venture, of course they are going to buy things like office space and employees, so it's reasonable by definition. We don't even look into it. Those things that are close enough. See, take your criteria from 17, page 17, which are excellent criteria in my mind, and you say these are the criteria by which we decide whether those ancillary parts of a joint venture that is itself reasonable are also reasonable.
Malcolm L. Stewart: --I guess we would say two things. The first is, up until now there has been no such thing in the law as concerted action that is per se legal, or per se reasonable.
Stephen G. Breyer: No, we wouldn't say per se. We are saying that the justification here: They are reasonable. Why are they reasonable? Because there is a legitimate joint venture, and this is an ancillary part of that legitimate joint venture. People can attack it, but it's going to be no easier to attack than if they tried to attack what you call a single entity.
Malcolm L. Stewart: I guess my point is that if, for instance, a disappointed bidder for the paper supply conduct -- contract challenged this as a Section 1 violation and said the commissioner's decision to go to Staples rather than Office Depot was unreasonable because Office Depot was offering a better product at a lower price -- there are certainly decisions that the commissioner could make with respect to procurement of supplies or the setting of wage levels that would be unreasonable in a business judgment sense, in that they wouldn't effectively carry on the mission of the organization, but they wouldn't be unreasonable in the -- the Section 1 sense. And the other thing I would say is that line of argument could have been made in Copperweld; that is, the Court could have concluded that--
Stephen G. Breyer: Well, look, your second criteria opens it up to attack in precisely the same way that my use of rule of reason does, because they are going to have to show it doesn't significantly affect actual or potential competition. Therefore, they file their claim, they say they win under the second criteria, and it's precisely the same as a person filing his claim and saying it's unreasonable. We are only talking terminology, but what worries me about this is the terminology, because I think that the lower courts have taken Copperweld terminology and transferred it to a place where it does, I think, perhaps not belong.
Malcolm L. Stewart: --Well -- well, in Dagher, for instance, the Court was dealing with a situation that's in some ways analogous to the one that you have here; that is, a joint venture in which entities that were economic competitors in some aspects of their businesses joined forces with respect to other aspects. And the Court in Dagher didn't squarely resolve these questions, whether Section 1 applied, but it said that in pricing its products, Equilon, the joint venture, was acting as a single firm, a single entity. The other point I would like to make about my -- my paper and employee example is that, in our view, the NFL commissioner, when carrying out those functions on behalf of the League, would be acting as a single entity, even though his power was derived from the consent of the teams. But if the Jets and the Giants agreed among themselves as to what wages they would pay their secretaries or from whom they would buy paper, that would be an entirely different thing. The fact that those teams are for some purposes part of a--
John Paul Stevens: May I ask you this question, Mr. Stewart? Would the antitrust issue before us be any different if instead of giving an exclusive contract to one purveyor of the product, the commissioner had entered into a multitude of different contracts, but specified a minimum price in every one he specified?
Malcolm L. Stewart: --I think the Section -- the question of whether Section 1 applied would not be any different; that is, the central Section 1--
John Paul Stevens: So the fact that this is an exclusive agreement is kind of a red herring in this case, isn't it?
Malcolm L. Stewart: --It -- it may not be a red herring with respect to the ultimate resolution of the case; that is, if the court on -- the lower court, on remand, if the case were remanded, applied rule of reason analysis, the -- the precise nature of the contract might bear on whether the restraint was reasonable, but it wouldn't bear on the question of whether concerted activity was involved; that is, what--
John G. Roberts, Jr.: I don't -- I'm sorry. I didn't mean to interrupt your answer.
Malcolm L. Stewart: --I guess my point was, once -- once the teams decided that they would -- rather than each negotiating individually, either with a single licensee or with multiple licensees, once they decided they would negotiate as a collective and that any potential licensee had to go to the collective rather than to the individual teams, that's the central Section 1 issue. And if the -- the collective had decided, we will give contracts to a multitude of potential bidders, that would not have affected the fact that concerted action was involved.
John G. Roberts, Jr.: So under your -- following of your paper case, are you saying that if the teams delegated to the commissioner the authority to decide whether we are going to enter -- whether the League is going to enter into one contract on logo products or let each team decide, that would be all right?
Malcolm L. Stewart: That would -- that initial delegation of authority would be subject to a Section 1 challenge, because that would be concerted action in the same way that the Court in Dagher said--
John G. Roberts, Jr.: Well, why isn't the decision to order paper from one company rather than another subject to Section 1 challenge?
Malcolm L. Stewart: --Because that -- that occurs after the point at which the commissioner has been vested with that authority. If -- if somehow a plaintiff wanted to say there was an -- there was illicit concerted action when the teams agreed to give the commissioner this general power, that would be subject to Section 1 review. It seems -- because that would be concerted action. It seems highly unlikely that such a challenge would prevail. But if--
John G. Roberts, Jr.: Why is that? I mean, if I'm Office Depot and I'm selling paper to the -- to the Giants -- or does this only apply to the commissioner's office?
Malcolm L. Stewart: --This only applies to carrying out the ordinary business of the League. It -- it would only apply to the commissioner's running of -- of the League office, not the running of the individual teams. And as I say, our central point is that--
Sonia Sotomayor: Could it -- using your example, could you tell me what the different questions would be under the single control theory you are proposing and a rule of reason application in its normal course? So what are the questions you would ask under your theory, and how do they differ from what would happen under a rule of reason analysis?
Malcolm L. Stewart: --I guess under our theory, we would first ask, as to an entity like this, which is entity that is compete in some respects--
Sonia Sotomayor: Let's not go into this case. Let's -- let's stay with your single commissioner.
Malcolm L. Stewart: --I think we would ask first: Is -- is the commissioner acting as a single entity when he exercises delegated authority in making a business judgment about which supplier to buy paper or what the wages should be? If the answer is yes, then the Section 1 inquiry is over, then the case is no different from a challenge to--
Sonia Sotomayor: Well, how does that stop any group of competitors from coming in and saying: Gee, I want to sell my gas; I'm going to let this single commissioner decide how much my gas will sell for, and if he chooses to sell it at the same price to everybody, both gas products, that's okay? How do you get to that?
Malcolm L. Stewart: --Well, if you get -- if a single business is deciding whether to buy paper from one supplier or from several, that wouldn't be subject to Section 1 review, because the decision of the single business might affect the welfare of the competitors, but it wouldn't be concerted action. And our point is that when -- I think the way in which our position differs from that of the two parties is that on the one hand, I think it is the logical implication of Petitioner's position that because the commissioner's authority to buy supplies for the League or hire referees for the League is ultimately derived from the consent of the individual teams who are independently owned. The logic of Petitioner's position suggests that that would be subject to Section 1 scrutiny. On the other hand, the logic of the NFL's position suggests that because the commissioner can set price, can decide from whom to buy paper on behalf of the League, the Jets and the Giants could reach a similar agreement, and the -- or the Jets and the Giants could agree on the prices they will pay secretaries--
John G. Roberts, Jr.: No, no, no, no, because they are not part of the broader concerted entity. There's no separate -- you are saying, well, just because all 32 teams can act as -- as an individual entity, any group of those teams can act as an individual entity.
Malcolm L. Stewart: --I think that follows logically from the position that this is one entity. Because in Copperweld, for instance, the Court noted that coordination between different divisions of a single company would not be subject to Section 1 scrutiny, and that implies not just that all the divisions could get together, but that any two could confer among themselves without raising Section 1 concerns.
John G. Roberts, Jr.: Thank you, Counsel. Mr. Levy.
Gregg H. Levy: Good morning, Mr. Chief Justice, and may it please the Court: The formation of a professional sports league, like the formation of any joint venture, may be subject to Section 1 scrutiny. Were it not for an act of Congress, the merger of the National Football League and the American Football League in 1970 would be one such example. But there is no challenge to venture formation here. There is no dispute that the NFL, including its licensing arm, NFL Properties, is a lawful venture. If venture formation is not an issue, then decisions by the venture about the venture's product are unilateral venture decisions, unilateral venture actions. They are not concerted actions of the -- of the venture's members.
Anthony M. Kennedy: Well, do we have to ask what was the intent at the beginning, as kind of an originalism thing? Everybody sits around and says: Let's have a football league. And 20 years later, they say: You know, the sale of hats and shirts is a pretty good thing; let's get into that business, too. That would -- that would -- that's case one. Case two is, when they formed the league initially, 30 years ago, they said: And be sure we will sell hats, and -- I don't understand the base point from which I find that this is a single entity.
Gregg H. Levy: Your Honor, we know here that at least as of 1963, when NFL Properties was formed, that there was a single entity formed, a single entity to produce and promote NFL Football. Now, I take issue with your suggestion -- your implication that there was a decision made here: Let's set up a separate line of business; we are going to sell hats also. That's not what happened, and the record on that is unambiguously clear here. It's undisputed. Plus--
Anthony M. Kennedy: Well, do you take issue with my question that this is a relevant inquiry? Is it part of the original agreement or isn't it, and why is it that the original agreement is somehow sacrosanct? I don't understand.
Gregg H. Levy: --I'm not suggesting that the original agreement is sacrosanct. That's why I suggested that by 1963 -- or the mid-1960s, when NFL Properties was formed, there was venture formation at that point. At that point, what was the question? The question was: How should the League, how should the venture members, best promote the venture product? And the decision was made to use the licenses of their intellectual property as a promotional tool. On that issue, the discovery and the record below was undisputed. There is documentary evidence from the NFL Properties' articles of incorporation. There is testimony from an NFL executive, Mr. Herzog. And the best proof, if there were any question about that, is reflected in the -- the organic documents of-- NFL Properties, which at the outset said that, if there were any revenues from the licensing activities, they would be donated to charitable and educational causes. Now, you know, Dagher confirmed the general principle, but if the venture is lawfully formed, the venture's decisions about how best to produce and promote its product are venture decisions, not the decisions of the venture members. But Copperweld provides the framework that decides the issue here, and neither Mr. Stewart nor Mr. Nager mention Copperweld, except in passing. Copperweld is the case by which this Court turned the page, if you will, on the formalism of prior cases, including Sealy, which Mr. Nager--
Ruth Bader Ginsburg: May -- may I ask you to go back just one step? Because you seem to treat this as though the NFLP was formed in 1963 and that was the end of it, but another description is: Well, it was formed, but then there were some teams that were not in it until later, and there were some other parts; that it has expanded. What it does has expanded since 1963. So it wasn't one point in time where there was formation, and then if you didn't -- if you are not challenging that, everything else is okay.
Gregg H. Levy: --Well, I -- I don't disagree with that, Your Honor. I think that in 1970, the League expanded. There was a merger. That merger of the National Football League and the American Football League would have been subject to Section 1 challenge because it involved venture formation, but an act of Congress said that that wasn't necessary. After 1970, there have been six teams, I believe, that have been added, essentially created, if you will, like Adam's rib. They have been created from the other NFL clubs, but it's essentially the same venture. The venture has expanded its production capability by adding new teams. It's expanded its output by adding new teams. And the role of licensing of intellectual property throughout that process has remained the same. The role has been to promote the venture's product. It's not--
Sonia Sotomayor: Excuse me. Did the teams -- did the NFL Properties or some centralized entity always exploit the trademarks of all the franchises, or was there a long period of time in which they each individually franchised their products?
Gregg H. Levy: --The record, Your Honor, says -- reflects that there was very little exploitation of intellectual property of the franchises prior to the creation of NFL Properties.
Sonia Sotomayor: But there was some, and that was done by the individual teams?
Gregg H. Levy: It was done, and it was done -- I mean, that's sort of an historic artifact. It was done, I believe collectively, through Roy Rogers Enterprises. But the -- but the teams continued to own their intellectual property. That's right.
Stephen G. Breyer: The problem, as I see, for you in this case is that the basic conclusion is in the court of appeals, where it says: "Viewed in this light, the NFL teams are best described as a single source of economic power when promoting NFL football through licensing. " Well, how do we know that? Their allegation is that that isn't true. And I have -- and Copperweld just seems to me to be very confusing on this, since -- since my hornbook knowledge of it was, we have Copperweld to deal with the case that we don't make booths in department stores compete in price against each other. All right? Normally, however, we say independent vendors can't get together and say they fix prices. That's per se. And joint ventures are in the middle, so we apply a rule of reason. Now, very simple, I thought that has been the law since Panagra. I don't know what, in fact, Copperweld has to do with it. And they are saying that this basic joint venture for promoting is not a reasonable agreement. So why shouldn't they have their shot? You might well win, but they want to make that claim.
Gregg H. Levy: The reason we know that this is not your typical joint venture is because Copperweld established a standard that said that what Section 1 is intended to regulate is not matters of form, not general market conditions, but rather the sudden joining together of independent sources of economic power. That's--
Stephen G. Breyer: Fine, but that's the conclusion here. That's not the -- that's the conclusion. You're -- the question is: Should they be permitted to join their centers of economic power into one when they promote and sell their T-shirts, sweatshirts, et cetera? Now, you can't answer that question by announcing the conclusion.
Gregg H. Levy: --But, Your Honor, we know that they are not independent sources of economic power, because none of them can produce the product of the venture on their own. No NFL club can produce a single unit of production, a single game or--
Stephen G. Breyer: Well, can't it ask someone to do that. Oh. Oh, you are saying the game.
Gregg H. Levy: --That's right.
Stephen G. Breyer: What does the game have to do with this? I thought we were talking about T-shirts and helmets, and I -- I thought it's the simplest thing in the world. You pick up the phone and say: "Hello, Shanghai, do you have a helmet? " [Laughter]
Gregg H. Levy: Your Honor, if -- if this were a venture designed to go out and license or manufacture or distribute caps, you would be right. But this is different, and we -- the undisputed evidence in the record below demonstrates it's different. It's different because the purpose of the licensing here is to promote the product. It's to promote the game. And the NFL member clubs are not independent sources of economic power in generating that game.
Stephen G. Breyer: Was this a summary judgment motion?
Gregg H. Levy: Yes. It was a summary judgment.
Antonin Scalia: Well, the stated purpose is to promote the game. The purpose is to make money. I don't think that they care whether the sale of the helmet or the T-shirt promotes the game. They -- they sell it to make money from the sale.
Gregg H. Levy: I--
Antonin Scalia: Now, it promotes the game if the money from the sale goes to the whole group, I suppose. But -- but don't tell me that there is not -- absent this agreement, there would not be an independent, individual incentive for each of the teams to sell as many of its own -- of its own shirts and helmets as possible.
Gregg H. Levy: --Your Honor, I would agree with you 100 percent that the purpose of the licensing is to make money, but not necessarily to make money through the royalties. The purpose of the licensing is to improve and promote the attractiveness of the game product, to get more people interested in watching the games on television, to get more people interested in buying tickets to the game.
Antonin Scalia: Well, I suppose that -- that could -- that issue could be tried.
Gregg H. Levy: And--
Antonin Scalia: But I don't -- I don't think so. And I suppose that's a triable issue, as to whether the purpose of -- of selling these things is to promote the whole NFL or to promote the particular team. It wants its own adherents and wants to sell its own product.
Gregg H. Levy: --In the abstract that's a triable issue, Your Honor, but not here. Here, the record was undisputed. There is evidence in the record on that point. The record -- there was evidentiary, there was documentary evidence. There is evidence that goes back to the organic documents of NFL Properties. And as I mentioned before, in the early days, the -- the net revenues, if any, the net royalties of the licensing operations, went to charity. So there is no -- there is no question here. Discovery was allowed on this issue, and the record is undisputed. So we have a classic case, a perfect, clean opportunity for this Court to apply the principles of Copperweld and the principles of Dagher to an area of the law that has been troubled for many years. Since 1984, the courts have wrestled with the question of how to deal with professional sports leagues and Section 1 claims against professional sports leagues. And the cases the courts have been -- have -- and with the exception of this case and the Bulls II case, the courts have been guided principally by pre-Copperweld precedent that rests on an era of formalism, an era when even an agreement between a parent and its subsidiary--
Sonia Sotomayor: What decision could the sports teams make that would be subject to the antitrust scrutiny under your definition of the permissible range of the joint venture activities? It seems to me that if the venture wanted to make sure all the teams hired secretaries at the same $1,000-a-year salary, that under your theory, that's okay, because it's a joint venture.
Gregg H. Levy: --Your Honor, my view is that the -- the NFL clubs are not separate sources of independent power. As a result, they are a unit. They are a single entity and it's--
Sonia Sotomayor: So the answer to my question is, there is -- you are seeking through this ruling what you haven't gotten from Congress: An absolute bar to an antitrust claim.
Gregg H. Levy: --No, Your Honor, that's not right.
Sonia Sotomayor: So -- so answer my question. What decision--
Gregg H. Levy: The answer to your question is this: With regard to Section 1 claims -- let's put aside Section 2 claims. Let's put aside claims between the NFL and other leagues. Let's put aside claims that relate to nonventure conduct, like the example of creating a trucking company that is reflected in our brief. The -- I can understand an argument, and we suggested as much in our brief below, that if the League engages in a practice of representing itself, going to the market -- the clubs go to market as independent entities. I can see an argument that would basically say, based on estoppel principles, that they should not be able to agree on -- on uniform prices or uniform wages for secretaries, for example. We did -- we made the point in our brief in the context of -- of coaches. But even -- even in the context of coaches, put aside for a moment, Section 2 remains available to the coaches if in fact they can demonstrate that there has been monopolization or attempted monopolization of a market. But the line that I draw is the line between production and promotion of the game. Coaches are closer to production and promotion of the game than secretaries, but I -- you know, there may be some -- some gap there. But -- but as long as the NFL clubs are -- are members of a unit; if they compete as a unit in the entertainment marketplace, as -- to use the language that Justice Rehnquist used -- they should be deemed a single entity and not subject to Section 1--
Stephen G. Breyer: But now the question is: Are you basing that on economic-related data about the pros and the cons of, you know, the economic harms of stopping them from competing, versus the economic benefits of allowing them to act as a separate -- as a single entity? Or are you basing it on a pure legal word called "single entity"? And what worried -- I thought when I read the opinion, first, of the district court, that he's just following what I think started in the Seventh Circuit, unfortunately, of taking this word "single entity" and throwing around -- throwing it around all over the place and stopping the economic analysis. But then when I read the last paragraphs of his opinion, he seems to be saying that when I go back to the record, which you want me to do, I will discover that there is lots of information showing economic benefit to this venture of promoting together. There's nothing to suggest they could compete, and so it's clear, to the point where they don't get to trial, that this is a reasonable agreement. All right. Now, is -- have I -- am I right in thinking what you are thinking?
Gregg H. Levy: --That's not my position, Your Honor.
Stephen G. Breyer: All right. Good. Then I want to know what your position is.
Gregg H. Levy: My position is based on the intended scope of the Sherman Act, Section 1 of the Sherman Act, which this Court, in Copperweld, made clear. The principle is articulated five or six separate times in the Copperweld opinion that Section 1 of the Sherman Act is intended to regulate the sudden joining together of separate sources of economic power.
Stephen G. Breyer: That's--
Gregg H. Levy: That's not this case.
Stephen G. Breyer: --Well, I wouldn't read -- can you read Copperweld as follows? Copperweld is ratifying a decision by an entrepreneur or several to organize his entrepreneurial entity as one where there are obvious efficiencies in doing that, such as it would obviously be inefficient to have the sales people behind counters in a single department store competing with each other in price. A joint venture is a situation where it's debatable whether or not there is that kind of efficiency in organization, and therefore, we apply a rule of reason. That's Panagra. I don't see anything in Copperweld that is intended to overrule Panagra. And as long as Panagra is not overruled, we would apply, at least to major decisions by joint ventures, a rule of reason. Now, what is wrong with -- and you might still win on the rule of reason. But why isn't that analysis correct? I am putting it forward as a hypothesis for you to discuss.
Gregg H. Levy: The analysis is not correct because there has been no challenge to venture formation here. I don't disagree that if there had been a challenge to venture formation here, that the considerations that you identify with regard to Panagra would apply. But that's not the case here. There is really no ambiguity about what has been challenged.
Stephen G. Breyer: There is a -- very definitely a joint venture here to play football, but there isn't a joint venture to build houses and there isn't a joint venture obviously in sight to promote. So they are saying that this is such a different activity, the playing of football versus the promotion of a logo, that we ought to go and look under a rule of reason as to whether a joint venture in promoting a logo is justified in terms of competition's harms and economic benefits.
Gregg H. Levy: Justice Breyer, I agree with you that there is a difference, an important difference, between venture and nonventure activity. If the NFL clubs were to create a trucking company or in your example, would go off and build houses, that's not a venture activity.
Stephen G. Breyer: Well, it would be if they tried to do it, but there, they would be attacked on the ground that under the rule of reason, they do not have the justification such that the antitrust law would allow them to do it.
Gregg H. Levy: Well--
Stephen G. Breyer: And they are saying: And promoting is precisely the same. That's why it seems to me to be something that you can't decide in theory. It's a matter of going back to economic facts with witnesses and so forth.
Gregg H. Levy: --Your Honor, the ancillary restraints doctrine would enable the court, in the circumstance that you describe, to categorize the decision to build housing as a non-venture activity -- a non-venture decision, and therefore, it would be evaluated independently of the considerations that apply to the venturers' objective. But, here, you cannot separate the venture activity of -- of -- for both football--
John Paul Stevens: Well, you -- you certainly could -- they certainly could, theoretically, each club could sell it's own logo.
Gregg H. Levy: --Each -- of course, each club could sell it's own logo, Your Honor, but the clubs have decided that the most effective--
John Paul Stevens: They have decided not to do it that way, but it could be done.
Gregg H. Levy: --Forgive me. I shouldn't speak over you. The clubs have decided that the most effective way to promote their product -- to promote NFL football is to do so collectively, to ensure that the marks of all 32 clubs are -- are out there, in--
John Paul Stevens: Yes, but maybe they also collectively decide the best way to make money and finance -- attendance and so forth, all agree on a housing program that they all jointly sponsor.
Gregg H. Levy: --Well, Your Honor, that -- I respectfully suggest that doesn't--
John Paul Stevens: It would be the most effective way to -- to raise the money to pay these players who make so much money.
Gregg H. Levy: --Well, that doesn't -- there is a plausibility standard that really has to be applied in terms of the arguments at issue.
John G. Roberts, Jr.: Well, if it's a plausibility standard at the threshold inquiry, there is a range of things, and I guess your -- your friend on the other side is just saying selling logos is closer to selling houses than it is to playing football.
Gregg H. Levy: Well, but there is a difference here, Your Honor, because there is a record. This -- this wasn't decided on a motion to dismiss. It was decided on summary judgment. There was undisputed evidence that the purpose of the licensing, going back 40 years -- 45 years, at this point, was to promote the game, and that's not an implausible determination to be made, but the -- but the evidence was undisputed. The case was decided on summary judgment, and so -- you know, this is not a situation where -- where there is the type of -- you know, the range of issues that needs to be -- you know, that needs to be resolved, of the kind that you described. You know, this is a situation--
John G. Roberts, Jr.: So if there is a factual -- if there is a factual dispute about whether a particular activity of the League is designed to promote the game or is designed simply to make more money, than that is the sort of thing that goes to trial?
Gregg H. Levy: --Well, I wouldn't -- I wouldn't put it in terms of make more money because I have agreed with Justice Scalia--
John G. Roberts, Jr.: Or do something else, do something other than promote the game.
Gregg H. Levy: --If -- Your Honor, just as in Dagher -- in Dagher, the issue was how to price the product. It's a fundamental decision that any venture has to make. This is a decision -- the undisputed evidence shows that this is a decision about how to promote the product, and that is no different from pricing a product in terms of the -- you know, the operations of a venture. You can't -- you can't hope to market a product, unless you have decided on how to promote it, and the antitrust laws in the Sherman Act encourage promotion. They encourage -- Copperweld encourages business people to make the judgment about how best to produce and to promote their product and how best to compete in the marketplace. They made, very clearly, that they don't want this judgments cabined or inhibited or chilled by -- by decisions by the Court or decisions by a jury. But, here, Judge Moran did what we thought was -- the -- and we continue to think, is the most appropriate way to serve the interests of both the Sherman Act and the considerations that this Court has recognized in Twombly and other cases, and that is to provide an early opportunity for a determination of whether or not the venture -- the venture conduct, the venture decision that is at issue, is a venture decision of a single entity or whether it's a collective decision of the -- of the venture participants. He allowed discovery limited to the single -- single entity issue. The -- the -- there is no challenge to the scope of discovery here. We have a complete record on this point that confirms and addresses the question that you presented, that the purpose of licensing here is to promote the product. But even if it weren't -- even if it weren't, I would suggest that -- that -- that the -- the evidence shows that fans identify with the logos, and we are talking about the logos and the marks here, not because they have some sort of intrinsic value, not because they -- you know, derive -- they derive some value from their attractiveness or appeal, independently in the marketplace, they derive their value from their identification with an NFL club that competes on the football field. And even -- even American Needle's president so confirmed in the declaration that he submitted in the case. So we have here a record that makes this -- this judgment for the Court relatively straightforward. It provides a straightforward opportunity for this -- this Court to confirm the principles established in -- established in Copperweld and to -- and to extend the principles that this Court noted in Dagher.
Sonia Sotomayor: --The -- if the reasonableness of this decision, that T-shirts promotes the game, is so self-evident, then why wouldn't the rule of reason control completely?
Gregg H. Levy: Well, Your Honor, I don't have--
Sonia Sotomayor: Why do we need to even go to the single-entity question when, by your own answer, it is undisputed, so abundantly clear, so reasonable--
Gregg H. Levy: --The answer--
Sonia Sotomayor: --what's the need to -- to label it single entity, as opposed to label it what it is, reasonable?
Gregg H. Levy: --The answer, Your Honor, is inherent in the rule of reason. In the modern era, defending a claim like this on the merits involves an investment of tens of millions of dollars, thousands of hours of executive time, hours and hours of court time. In the Salvino case, there were three years of discovery spent on rule of reason issues--
Sonia Sotomayor: But it's a single purpose -- and I certainly sympathize with that argument. But isn't the proposition of antitrust law that we have a reason for worrying about concerted activity? We have a genuine concern as -- or Congress does -- about independent entities joining together and fixing prices. And we permit them to do so, as Justice Breyer indicated, when the venture has a purpose that is independent than -- from the individual interest, but we say, when it doesn't, we have to ensure, under the rule of reason, that what they are doing is reasonable. I'm -- I am very swayed by your arguments, but I can very much see a counterargument that promoting T-shirts is only to make money. It doesn't really promote the game. It promotes the making of money. And once you fix prices for making money, that's a Sherman Act violation.
Gregg H. Levy: --But, Your Honor, I would agree with almost everything that you said, but we are not dealing here with independent sources of economic power. These clubs are not independent. None could produce their product on their own.
Sonia Sotomayor: But they own the trademarks, so they could.
Gregg H. Levy: They do, but the trademarks don't have any value. They don't have any purpose independent of the game. The trademarks are invented to identify the clubs on the field. They are -- they are promoted and distributed to -- to encourage loyalty among fans of the clubs. The -- the trademarks are simply a tool that the clubs use to--
Stephen G. Breyer: So let's call it an NFL supermarket. Red Sox supermarket, Patriots automobile shop, Patriots tractor store, everything becomes Patriots. Everything -- no competition anywhere. Now, you say that's ridiculous, and once you say that's ridiculous, you are now into the business of deciding whether this aspect of the undeniable legal joint venture to play baseball or football, whether this aspect is properly the subject of merger. And once you are into that, you are into your $7 million, and I can't really think of anything that's going to help you there. And the SG in its brief, you see on that key, 16 and 17, seem to me, simply reproduces in precisely somewhat different language, but precisely the argument you are now having, is this the kind of thing that should be merged? We know by applying the rule of reason. And second, if it is merged, is this particular aspect of it something where there could be competition, and there isn't much justification, that's their rule, too. Again, we are back to the rule of reason. So how do I save you the $7 million?
Gregg H. Levy: --But, Your Honor, this case is the perfect example. We were able to resolve this case on summary judgment without incurring the burden of rule of reason discovery, and your reference to the Patriots tractor store drives home a distinction that I think is worth leaving with the Court at this point. This is not a situation, like the situation to which we referred in our brief, where John Deere and International Harvester get together and fix the prices of their logos for sale to cap manufacturers. John Deere and International Harvester, for many years -- I mean, early on, they gave away the hats throughout the Midwest, to encourage farmers to buy their farm equipment. They are independent sources of economic power.
Antonin Scalia: Well, you -- you say that the -- that the trademarks have no value apart from the -- from the game. I guess you could say the same thing for each individual franchise of each of the 32 clubs. They are worthless, if NFL Football disappears. So does that mean they -- that they -- they can agree to fix the price at which their -- their -- their franchises will be sold, by concerted agreement, because after all, they are worthless apart from the NFL?
Gregg H. Levy: Well, I -- I certainly agree with your -- your premise, Your Honor, that they are worthless apart from -- except there is some residual value, I don't -- I don't--
Antonin Scalia: Yeah.
Gregg H. Levy: --I don't dispute -- dispute that. Could they agree on prices for their franchises to be sold? Yes, I assume they could agree because they are not independent sources of economic power.
Antonin Scalia: Oh, okay, you--
Stephen G. Breyer: So we don't even ask the question whether under the rule of reason such a thing is reasonable or justified?
Gregg H. Levy: Your Honor--
Antonin Scalia: --I thought I was reducing it to the absurd. [Laughter]
Gregg H. Levy: --You know, I -- I -- I could bring the basic point that I -- I want to leave you with, back to our example that's a little bit closer to home. In 1999 -- 1919, when Judge Covington and Mr. Burling went to joint forces, they formed a law firm eventually. Ninety years later that venture decides on the prices, the rates that Mr. Ludwin and I will -- will decide for our -- will charge for our services. Sometimes that venture, the firm decides that we won't do business with a particular client or that we will limit our business to a particular client in a particular industry. Nobody suggests that that decision of the venture, a lawful venture, is subject to Section 1 scrutiny as a violation of the Sherman Act constitutes a concerted refusal to deal. But if Mr. Ludwin and I leave the -- leave the firm and we set up solo practices and then decide on what our rates are going to be, or then decide on what our clients -- what clients we will serve and not serve, that is an agreement between independent competitors. That's the fundamental difference. That is a fundamentally different situation between -- compared to the situation of the firm setting our rates. And it reflects the intersection of Copperweld and Dagher. It shows how Dagher and Copperweld fit together hand in glove to demonstrate purposes that the NFL, for purposes of promoting its product, is a single entity.
John G. Roberts, Jr.: Thank you, counsel. Mr. Nager, you have 3 minutes remaining.
Glen D. Nager: Thank you, Mr. Chief Justice. I'd just like to pick up on a question that Chief Justice Roberts asked me with a point that Justice Breyer made, which is that both the Solicitor General's position and the NFL's position are taking rule of reason concepts and trying to push them into the concerted conduct inquiry, which will have the effect, of course, of confusing courts that presently understand the inquiry. That's Justice Breyer's point about terminology. It also has substantive impact because of the way litigation gets conducted. As Mr. Levy has said, this case was litigated below at of the district court judge's direction only on the concerted conduct question, not on the -- the rule of reason questions. So, American Needle didn't have the opportunity to conduct discovery and make proof about anticompetitive effects and to try to rebut the arguments that the NFL was making about procompetitive justifications. The NFL's argument is asking -- they are asking for a per se rule of legality for everything that the NFL does that is related to football. That can't be--
John G. Roberts, Jr.: What's the answer to the -- what's the answer to the hypothetical Mr. Levy ended with, the law firm?
Glen D. Nager: --On the -- the partnership example. Well, the partnership is -- is as follows: As -- as to the extent that there is case law on the subject, as with all joint ventures, the case law treats law firm partnerships as joint ventures and subjects them to the rule of reason, and every commentator whether it be Judge Bork or anyone else, has said, but, of course, law firms don't have market power so they couldn't possibly have anticompetitive effects on the market, and the rule of reason claim trying to challenge the rates at which a law firm sets its partnership rates wouldn't pass -- survive a motion to dismiss. With respect to his analogy to Dagher, the difference between the Dagher effects -- of course this Court didn't in Dagher didn't accept the argument that I made on behalf of Texaco and Shell that they should be treated as a single entity if, in fact, their formation was lawful. This Court only ruled on the -- on the price fixing issue. But the argument that was made in Dagher was if you had a wholly integrated joint venture, one in which there had been a complete pooling of relevant capital, a complete sharing of profits and losses and an enforceable non-compete agreement, in those circumstances the -- the owners of that joint venture were not like typical joint venturers, they, in fact, were like the share holders in a publicly held company, because their only interest at that point is in their investment. They have no other economic interests that are affected by their ownership and control of that entity. And at that point they could be treated as one. In Justice Thomas's opinion for the Court has some residence of that in it, but it specifically says it is only addressing it in terms of the per se rule.
John G. Roberts, Jr.: Thank you, counsel. The case is submitted.