Opinion ID: 195635
Heading Depth: 2
Heading Rank: 1

Heading: Lack of Antitrust Injury

Text: To establish an antitrust violation under 1 of the Sherman Act, Sullivan must prove that the NFL's public ownership policy is in restraint of trade. Monahan's Marine, Inc. v. -7- Boston Whaler, Inc., 866 F.2d 525, 526 (1st Cir. 1989). Under antitrust law's rule of reason, the NFL's policy is in restraint of trade if the anticompetitive effects of the policy outweigh the policy's legitimate business justifications. Id. at 526-27 (citing Business Electronics Corp. v. Sharp Electronics Corp., 485 U.S. 717, 723 (1988)). Anticompetitive effects, more commonly referred to as injury to competition or harm to the competitive process, are usually measured by a reduction in output and an increase in prices in the relevant market. National Collegiate Athletic Ass'n v. Board of Regents of Univ. of Okla., 468 U.S. 85, 104-07 (1984) (Restrictions on price and output are the paradigmatic examples of restraints of trade) (hereinafter NCAA); Chicago Professional Sports Ltd. Partnership v. National Basketball Association, 961 F.2d 667, 670 (7th Cir.), cert. denied, 113 S. Ct. 409 (1992). Injury to competition has also been described more generally in terms of decreased efficiency in the marketplace which negatively impacts consumers. Town of Concord v. Boston Edison Co., 915 F.2d 17, 21-22 (1st Cir. 1990), cert. denied, 499 U.S. 931 (1991); Interface Group, Inc. v. Massachusetts Port Auth., 816 F.2d 9, 10 (1st Cir. 1987). Thus, an action harms the competitive process when it obstructs the achievement of competition's basic goals - - lower prices, better products, and more efficient production methods. Town of Concord, 915 F.2d at 22. The jury determined in this case, via a special verdict form, that the relevant market is the nationwide market for the -8- sale and purchase of ownership interests in the National Football League member clubs, in general, and in the New England Patriots, in particular. The jury went on to find that the NFL's policy had an actual harmful effect on competition in this market. The NFL argues on appeal that Sullivan has not established the existence of any injury to competition, and thus has not established a restraint of trade that can be attributed to the NFL's ownership policy. The league's attack is two-fold, asserting (1) that NFL clubs do not compete with each other for the sale of ownership interests in their teams so there exists no competition to be injured in the first place; and (2) Sullivan did not present sufficient evidence of injury to competition from which a reasonable jury could conclude that the NFL's policy restrains trade. Although we agree with the NFL that conceptualizing the harm to competition in this case is rather difficult, precedent and deference to the jury verdict ultimately require us to reject the NFL's challenge to the finding of injury to competition. Critically, the NFL does not challenge on appeal the jury's initial finding of the relevant market and no corresponding challenge was raised at trial.1 As a result, the 1 The NFL argues in passing that certain expert testimony related to the relevant market issue was inherently unreasonable and thus could not support the jury's relevant market finding. We do not consider this passing argument to be sufficient to raise the relevant market issue on appeal as matters averted to in a perfunctory manner, unaccompanied by some effort at developed argumentation, are deemed waived on appeal. United States v. Innamorati, 996 F.2d 456, 468 (1st Cir. 1993). More importantly, the NFL did not challenge the relevant market issue -9- NFL faces an uphill battle in its attack on the presence of an injury to competition. Given the existence of a relevant market for ownership interests in NFL teams, it is reasonable to presume that a policy restricting the buying and selling of such ownership interests injures competition in that market. The NFL nevertheless maintains that NFL teams do not compete against each other for the sale of their ownership interests, even if we accept that a market exists for such ownership interests. 1. No Competition Subject to Injury as Matter of Law The NFL correctly points out that member clubs must cooperate in a variety of ways, and may do so lawfully, in order to make the football league a success. See United States Football League v. National Football League, 842 F.2d 1335, 1372 (2d Cir. 1988); Los Angeles Memorial Coliseum Comm'n v. National Football League, 726 F.2d 1381, 1391-92 (9th Cir.), cert. denied, 469 U.S. 990 (1984) (hereinafter L.A. Coliseum); North American Soccer League v. National Football League, 670 F.2d 1249, 1251 (2d Cir.), cert. denied, 459 U.S. 1074 (1982) (hereinafter NASL). On the other hand, it is well established that NFL clubs also compete with each other, both on and off the field, for things like fan support, players, coaches, ticket sales, local broadcast revenues, and the sale of team paraphernalia. Mid-South Grizzlies v. National Football League, 720 F.2d 772, in either its directed verdict motion or in its motion for judgment as a matter of law. We will not consider arguments which could have been, but were not, advanced below. Domegan v. Fair, 859 F.2d 1059, 1065 (1st Cir. 1988). -10- 786-87 (3d Cir. 1983), cert. denied, 467 U.S. 1215 (1984); L.A. Coliseum, 726 F.2d at 1390, 1393, 1395, 1397. The question of whether competition exists between NFL teams for sale of their ownership interests, such that the NFL's ownership policy injures this competition, is ultimately a question of fact. The NFL would have us find, however, that, as a matter of law, NFL teams do not compete against each other for the sale of their ownership interests. We decline to make such a finding. The NFL relies on a series of cases which allegedly stand for the well established rule that a professional sports league's restrictions on who may join the league or acquire an interest in a member club do not give rise to a claim under the antitrust laws. Seattle Totems Hockey Club, Inc. v. National Hockey League, 783 F.2d 1347 (9th Cir.), cert. denied, 479 U.S. 932 (1986); Fishman v. Estate of Wirtz, 807 F.2d 520 (7th Cir. 1986); Mid-South Grizzlies, 720 F.2d at 772; Levin v. National Basketball Ass'n, 385 F. Supp. 149 (S.D.N.Y. 1974). These cases, all involving a professional sport's league's refusal to approve individual transfers of team ownership or the creation of new teams, do not stand for the broad proposition that no NFL ownership policy can injure competition. See, e.g., NASL, 670 F.2d at 1259-61 (finding that the NFL's policy against crossownership of NFL teams and franchises in competing sports leagues, which also effectively barred certain owners who owned other sports franchises from purchasing NFL teams, injured competition between the NFL and competing sports leagues and thus -11- violated 1 of the Sherman Act). None of the cases cited by the NFL considered the particular relevant market that was found by the jury in this case or a league policy against public ownership. Seattle Totems and Mid-South Grizzlies considered potential inter-league competition when a sports league rejected plaintiffs' applications for new league franchises. Seattle Totems, 783 F.2d at 1349-50; Mid-South Grizzlies, 720 F.2d at 785-86. Those decisions found no injury to competition because the plaintiffs were not competing with the defendant sports leagues, but rather, were seeking to join those leagues. Seattle Totems, 783 F.2d at 1350; Mid-South Grizzlies, 720 F.2d at 785-86. Mid-South Grizzlies left open the possibility that potential intra-league competition between NFL football clubs could be harmed by the NFL's action, but found that the plaintiff in that case had not presented sufficient evidence of harm to such competition. Mid- South Grizzlies, 720 F.2d at 786-87. The Fishman and Levin cases concerned the National Basketball Association's (N.B.A.) rejection of plaintiffs' attempts to buy an existing team. Fishman, 807 F.2d at 525-31; Levin, 385 F. Supp. at 150-51. Those cases also based their finding that there was no injury to competition on the fact that the plaintiffs were seeking to join with, rather than compete against, the N.B.A. Fishman, 807 F.2d at 544; Levin, 385 F. Supp. at 152. Neither case considered whether competition between teams for investment capital was injured. As pointed out -12- in Piazza v. Major League Baseball, 831 F. Supp. 420 (E.D.Pa. 1993), Fishman explicitly recognized the potential for competition in the market for ownership of teams, although the plaintiff had failed to raise the issue, and Levin simply presumed, incorrectly, that there could never be any competition among league members. Piazza, 831 F. Supp. at 430-31 & n.16 (citing Fishman, 807 F.2d at 532 n.9; and Levin, 385 F. Supp. at 152). The important distinction to make between the cases cited by the NFL and the present case is that here Sullivan alleges that the NFL's policy against public ownership generally restricts competition between clubs for the sale of their ownership interests, whereas in the aforementioned cases, a league's refusal to approve a given sale transaction or a new team merely prevented particular outsiders from joining the league, but did not limit competition between the teams themselves. To put it another way, the NFL's public ownership policy allegedly does not merely prevent the replacement of one club owner with another -- an action having little evident effect on competition -- it compromises the entire process by which competition for club ownership occurs.2 2 This same argument distinguishes cases cited by the NFL for the proposition that a franchisor's disapproval of a proposed sale of a franchise does not give rise to an antitrust injury. See Kestenbaum v. Falstaff Brewing Corp., 514 F.2d 690 (5th Cir. 1975), cert. denied, 424 U.S. 943 (1976); McDaniel v. General Motors Corp., 480 F. Supp. 666 (E.D.N.Y. 1979). Individual decisions to block the sale of a franchise do not implicate the harm to competition that is caused by a policy restricting all sales of a certain type of ownership interest. Only the broad- -13- We take a moment to briefly address a related argument raised by the NFL to the effect that NFL clubs are unable to conspire with each other under 1 of the Sherman Act because they function as a single enterprise in relation to the league's public ownership policy. The NFL asserts that the Supreme Court's holding in Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752 (1984), controls the facts of this case and overturns prior caselaw holding that NFL clubs do not constitute a single enterprise but rather, are separate entities which were capable of conspiring with each other under 1. See L.A. Coliseum, 726 F.2d at 1387-90; NASL, 670 F.2d at 1256-58. We do not agree that Copperweld, which found a corporation and its wholly owned subsidiary to be a single enterprise for purposes of 1, Copperweld, 467 U.S. at 771, applies to the facts of this case or affects the prior precedent concerning the NFL. See McNeil v. National Football League, 790 F. Supp. 871, 879-80 (D.Minn. 1992) (holding that Copperweld did not apply to the NFL and its member clubs and finding the clubs to be separate entities capable of conspiring together under 1). Copperweld's holding turned on the fact that the subsidiary of a corporation, although legally distinct from the corporation itself, pursue[d] the common interests of the whole rather than interests separate from those of the corporation itself. Copperweld, 467 U.S. at 770. As emphasized in City of Mt. based policy has the potential to compromise the entire competitive process for the buying and selling of a good in a relevant market. -14- Pleasant, Iowa v. Associated Elec. Co-op., Inc., 838 F.2d 268 (8th Cir. 1988), upon which the NFL relies for the application of Copperweld to this case, the critical inquiry is whether the alleged antitrust conspirators have a unity of interests or whether, instead, any of the defendants has pursued interests diverse from those of the cooperative itself. Id. at 274-77 (defining diverse as interests which tend to show that any two of the defendants are, or have been, actual or potential competitors). As we have already noted, NFL member clubs compete in several ways off the field, which itself tends to show that the teams pursue diverse interests and thus are not a single enterprise under 1. Ultimately, the NFL's Copperweld challenge is subsumed under the question of whether or not the evidence can support a finding that NFL teams compete against each other for the sale of their ownership interests. Proof of such competition defeats both the NFL's challenge to the existence of an injury to competition and the NFL's Copperweld argument as well. Insufficient proof of such competition would require a judgment in favor of the NFL anyway, regardless of the implications under Copperweld. As we discuss below, the jury's finding that there exists competition between teams for the sale of ownership interests was based on sufficient evidence. 2. Insufficient Evidence of Harm to Competition The NFL contends that Sullivan did not present sufficient evidence concerning: (1) the existence of competition -15- between NFL clubs for the sale of ownership interests, or (2) a decrease in output, an increase in prices, a detrimental effect on efficiency or other incidents of harm to competition in the relevant market, from which a reasonable jury could conclude that the NFL's policy injured competition. Although we agree that the evidence of all these factors is rather thin, we disagree that the evidence is too thin to support a jury verdict in Sullivan's favor. With respect to evidence of the existence of competition for the sale of ownership interests, one of Sullivan's experts, Professor Roger Noll, testified that one of the ways in which the NFL exercises monopoly power in the market for the franchises and ownership is by excluding certain people from owning all or part -- any type part of an NFL franchise. Dr. Noll explained that this enables a group of owners, in this case, you only need eight owners, to exclude from the League and from competing with them, people who might be more effective competitors than they are. The record also contains statements from several NFL owners which could reasonably be interpreted as expressions of concern about their ability to compete with other teams in the market for investment capital in general, and for the sale of ownership interests in particular. For example, Arthur Rooney II of the Pittsburgh Steelers stated in a letter that he did not believe that the individually or family owned teams will be able to compete with the consolidated groups. Ralph Wilson of the Buffalo Bills stated that big corporations -16- should not own teams because it gives them an unfair competitive advantage over other teams since corporations will funnel money into the team and make it more competitive than the other franchises. Former NFL Commissioner Pete Rozelle admitted that similar sentiments had been expressed by NFL members. Although it is not precisely clear that the competition about which Noll, Rooney, and Wilson were discussing is the same competition at issue here -- that is competition for the sale of ownership interests -- a jury could reasonably interpret these statements as expressing a belief that the competition exists between teams for the sale of ownership interests. The statements of the two NFL owners imply that greater access to capital for all teams will put increased pressure on some teams to compete with others for that capital, and all the statements reveal that the ownership rules, particularly the rule against public ownership, is the main obstacle preventing such access. The fact that ownership by consolidated groups is not necessarily the same as public ownership does not affect the conclusion that teams face competitive pressure in selling their ownership interests generally to whoever might buy them. We also note that evidence of actual, present competition is not necessary as long as the evidence shows that the potential for competition exists. See L. A. Coliseum, 726 F.2d at 1394 (discussing significance of potential competition, especially where challenged policy limits such competition so that it is not evident in practice). It -17- would be difficult indeed to provide direct evidence of competition when the NFL effectively prohibits it. The NFL focusses on the fact that Professor Noll testified that many of the purchasers of Patriots' stock would be New England sports fans and others in the New England area. The NFL points out that other NFL teams would not compete with the Patriots for the sale of stock to their own fans. This argument slightly distorts Professor Noll's testimony. Professor Noll stated that local souvenir buyers would be one portion of the market for Patriots stock. Professor Noll also testified several times that other investors would buy Patriots stock as well, for investment purposes. Noll's point was that the souvenir buyers would serve to bid up the price of the stock above what the price would normally be if the Patriots were a regular company. His testimony did not preclude a finding that NFL teams compete against each other for investment capital via the sale of ownership interests. The record also contains sufficient evidence of the normal incidents of injury to competition from the NFL's policy - - reduced output, increased prices, and reduced efficiency -- to support the jury's verdict. As Dr. Noll pointed out in his testimony, the NFL's policy excludes individuals . . . who might want to own a share of stock in a professional football team. Several NFL officials themselves admitted that the policy restricts the market for investment capital among NFL teams. There is thus little dispute that the NFL's ownership policy -18- reduces the available output of ownership interests. The NFL is correct that, in one sense, the overall pool of potential output is fixed because there are only 28 NFL teams and, although their value may fluctuate, the quantity of their ownership interests cannot. However, the NFL's public ownership policy completely wipes out a certain type of ownership interest -- public ownership of stock. By restricting output in one form of ownership, the NFL is thereby reducing the output of ownership interests overall. In other words, the NFL is literally restricting the output of a product -- a share in an NFL team. There was considerable testimony concerning the price effects of the NFL policy. Both of Sullivan's experts testified that the policy depressed the price of ownership interests in NFL teams because NFL franchises would normally command a premium on the public market relative to their value in the private market, which is all that the league currently permits. Professor Noll testified that fan loyalty would push up the price of ownership interests if sales to the public were allowed. Even former Commissioner Pete Rozelle acknowledged that it was pointed out, with justification, it has been over the years, that [the ownership policy] does restrict your market and, very likely, the price you could get for one of our franchises if you wanted to sell it, because you are eliminating a very broad market . . . . And they have said that there is a depression on the price they could get for their franchise. The NFL points out that the alleged effect of its -19- ownership policy is to reduce prices of NFL team ownership interests, rather than to raise prices which is normally the measure of an injury to competition. E.g., Town of Concord, 915 F.2d at 22. We acknowledge that it is not clear whether, absent some sort of dumping or predatory pricing, see, e.g., Monahan's Marine, Inc. v. Boston Whaler, Inc., 866 F.2d 525, 527 (1st Cir. 1989), a decrease in prices can indicate injury to competition in a relevant market. The Supreme Court has emphasized, however, that overall consumer preferences in setting output and prices is more important than higher prices and lower output, per se, in determining whether there has been an injury to competition. NCAA, 468 U.S. at 107. In this case, regardless of the exact price effects of the NFL's policy, the overall market effects of the policy are plainly unresponsive to consumer demand for ownership interests in NFL teams. Dr. Noll testified that fans are interested in buying shares in NFL teams and that the NFL's policy deprives fans of this product. Moreover, evidence was presented concerning the public offering of the Boston Celtics professional basketball team which demonstrated, according to some of the testimony, fan interest in buying ownership of professional sports teams. Thus, a jury could conclude that the NFL's policy injured competition by making the relevant market unresponsive to consumer preference. Id.3 3 The NFL maintains that price and output are not affected because its ownership policy does not limit the number of games or teams, does not raise ticket prices or the prices of game telecasts and does not affect the normal consumer of the NFL's product in any other way. Such facts might be relevant to an -20- As for overall efficiency of production in the relevant market,4 Sullivan's experts testified that the NFL's policy hindered efficiency gains, and that allowing public ownership would make for better football teams. Professor Noll stated that the NFL's public ownership policy prevented individuals who might be more efficient and much better at running a professional football team from owning teams. Dr. Noll also stated that publicly owned NFL teams would be better managed, and produce higher quality entertainment for the fans. Noll testified that the ownership rule excluded certain types of management structures which would likely be more efficient in running the teams, resulting in higher franchise values. One NFL owner, Lamar Hunt, acknowledged that increased access to capital can improve a team's operations and performance. A memorandum prepared by an NFL staff member stated that changes to the NFL's inquiry of whether the NFL's policy harms overall efficiency, see infra note [4], but it is not relevant to whether the policy affects output and prices in the relevant market for ownership interests. Just because consumers of NFL football are not affected by output controls and price increases does not mean that consumers of a product in the relevant market are not so affected. In this case, two types of consumers are denied products by the NFL policy: consumers who want to buy stock of the Patriots or other teams, and consumers like Sullivan who want to purchase investment capital in the market for public financing. 4 Although the product at issue in the relevant market is ownership interests, efficiency in production of that product can be measured by the value of the ownership interest. That is, an improved product produced more efficiently will be reflected in the value of the output in question (regardless of the price). In this case, the value of the product depends on the success of the Patriots' football team, the overall efficiency of its operations, and the success of the NFL in general. -21- public ownership policy could contribute to each NFL team's own financial strength and viability, which in turn would benefit the entire NFL because the league has a strong interest in having strong, viable teams. The NFL presented a large amount of evidence to the contrary and now claims on appeal that Sullivan's position was based on nothing more than sheer speculation. We have reviewed the record, however, and we cannot say that the evidence was so overwhelming that no reasonable jury could find against the NFL and in favor of Sullivan. We therefore refuse to enter judgment in favor of the NFL as a matter of law.