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NFL Merchandise Antitrust Lawsuit

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We can all agree that NFL apparel is expensive.  A new lawsuit against the NFL claims that antitrust violations are a big part of the reason.

A class action lawsuit has been filed against the National Football League (NFL) and sports merchandise leader Fanatics in a Manhattan federal court. An Illinois resident accuses the NFL and its 32 teams of conspiring with Fanatics, based in Jacksonville, Florida, to monopolize the online retail market for licensed sports merchandise like jerseys and t-shirts. The suit claims this has led to consumers paying artificially high prices due to stifled competition.

The lawsuit alleges that instead of engaging in competitive sales, the NFL and its teams have effectively given Fanatics exclusive control over the market, with the sports merchandise company sharing its monopoly profits with the teams. This arrangement is said to have disadvantaged other retailers.

Round Two of this Battle

This lawsuit follows a series of attempts by one law firm to hold Fanatics and the NFL accountable for alleged anticompetitive practices. A previous similar lawsuit was dismissed by a Manhattan federal judge, who ruled that the case should be resolved through private arbitration rather than in court.

The plaintiff in the current lawsuit, Charles Franz, argues that his use of a third-party digital wallet to purchase NFL merchandise did not bind him to an arbitration agreement. The lawsuit claims that Fanatics’ extensive control over both online and offline stores, including those of major sports leagues, has significantly hindered the competitive capabilities of smaller retailers on platforms like Amazon.

Breaking Down the Allegations in the Complaint

This antitrust lawsuit alleges that the NFL and Fanatics, a large sports merchandise company, have been working together in a way that unfairly limits competition in the market for selling NFL-related products like jerseys and t-shirts online. Here’s a breakdown of the key allegations:

  1. Exclusive Control to Fanatics: The NFL and its 32 teams are accused of making deals with Fanatics that give Fanatics almost complete control over the online sales of NFL merchandise. Essentially, they’re accused of handing over the online retail market to Fanatics exclusively.
  2. Higher Prices for Consumers: Because of this alleged control, other retailers who might want to sell NFL products online can’t compete effectively. This lack of competition means that Fanatics can set higher prices than what might be seen in a competitive market where many sellers are vying for customers.
  3. Disadvantage for Other Retailers: The lawsuit claims that smaller online retailers are at a disadvantage because they’re not able to sell NFL products as easily due to the alleged control of the market by Fanatics. This means less choice for consumers and fewer opportunities for other businesses to make profits from selling NFL goods.
  4. Antitrust Violation: The core legal issue here is that such actions, if proven true, could violate U.S. antitrust laws. These laws are designed to promote competition and prevent monopolies or unfair practices that harm consumers and other businesses.
  5. Seeking Damages and Changes: The lawsuit isn’t just about money; it’s also about changing the market. But of course it is mostly about money. The plaintiffs are asking for triple the amount of financial damages they claim to have suffered and for the court to order changes that would bring back competition to the online market for NFL merchandise.

In simple terms, the lawsuit is accusing the NFL and Fanatics of playing unfairly by limiting competition and controlling the market, which leads to higher prices and less choice for people looking to buy NFL merchandise online.

Breaking Down the Damages Plaintiffs Seek

The lawsuit estimates the class size to consist of hundreds of thousands, possibly millions, of affected consumers. It seeks triple damages and an injunction to reinstate competitive practices in the marketplace, aiming to disrupt the alleged monopoly and lower prices for NFL licensed products sold online.

The plaintiffs in the NFL Licensed Products case are seeking a range of reliefs, which can be broadly categorized into two types: injunctive relief and monetary damages.

Injunctive Relief

The primary request for injunctive relief is a court order that would prohibit the defendants from continuing their alleged anticompetitive practices. Specifically, they are asking for:

  1. Prohibition of Enforcing Restrictive Agreements: The plaintiffs want the court to stop the defendants from enforcing any agreements that limit online retailers’ ability to sell NFL Licensed Products on Third-Party Online Marketplaces (TPOMs), use NFL-related keywords for marketing, or bid on such search terms.
  2. Restraining Fanatics’ Agreements with Manufacturers: They seek to restrain Fanatics from enforcing any agreements with manufacturers that hinder competitors’ access to NFL Licensed Products for online resale.

Monetary Damages

The plaintiffs are seeking monetary compensation that includes:

  1. Treble Damages: Under Sections 1 and 2 of the Sherman Act, the plaintiffs are seeking treble (triple) the amount of damages they have sustained due to the alleged anticompetitive behavior of the defendants. This provision is a feature of U.S. antitrust law designed to provide a strong deterrent against such practices.
  2. Legal Costs and Attorneys’ Fees: They are also asking for the recovery of all legal costs and reasonable attorneys’ fees. This is typical in civil litigation to compensate the winning party for the expenses incurred in pursuing the lawsuit.
  3. Pre- and Post-Judgment Interest: The plaintiffs are seeking interest on the damages, both before and after the judgment. This is intended to compensate for the time value of money lost due to the defendants’ alleged actions.

Permanent Injunction

Finally, the plaintiffs are seeking a permanent injunction to prevent the defendants from engaging in or renewing the alleged anticompetitive behavior. This is a forward-looking remedy aimed at preventing future harm and maintaining competitive practices in the market.

NFL Antitrust Exemption Explained

The NFL’s antitrust exemption refers to a specific legal status that allows the league to engage in certain business practices that would otherwise be considered violations of antitrust laws. Antitrust laws are designed to prevent monopolistic practices and promote competition. However, professional sports leagues like the NFL have been granted certain exemptions.

The most notable exemption for the NFL comes from the Sports Broadcasting Act of 1961. This act allows the NFL (and other sports leagues) to pool their broadcasting rights and sell them as a package to television networks, which would typically be considered a violation of antitrust laws since it restricts competition. The rationale behind this exemption is to promote the league’s stability and equalize revenue among its teams, regardless of their individual market size.

Why the Exemption Does Not Apply in the Current Case

In the lawsuit being discussed, the allegations are not about the NFL’s broadcasting rights or its internal operations which are typically covered by the antitrust exemption. Instead, the lawsuit focuses on the NFL’s alleged monopolistic control over the online retail market for its licensed products. It accuses the NFL and Fanatics of creating an unfair market environment by limiting competition from other online retailers, leading to higher prices for consumers.

This issue falls outside the scope of the NFL’s antitrust exemption because it involves the sale of merchandise, not broadcasting rights. The antitrust exemption is quite specific and does not extend to all commercial activities of the NFL. Therefore, if the NFL is found to be engaging in monopolistic practices in the retail market, it would be subject to standard antitrust laws that apply to most industries and businesses, aimed at protecting consumers and competitors from unfair market practices.

Will Plaintiffs Win This NFL Antitrust Lawsuit?

Our lawyers write about the types of lawsuits we handle and the type of lawsuits that interest our readers. This is most definately the latter.  Our attorneys do not handle antitrust lawsuits and we are ill-equipped to handicap the odds of this lawsuit’s success.

In Other NFL Lawsuit News

The NFL is big business and so is suing them.  Last week, federal court judge ruled that the NFL will face a trial, potentially involving several billion dollars, in February concerning its exclusive distribution of the “Sunday Ticket” game broadcasts.  The trial is set for February 22, 2024.

The judge is permitting a nationwide group of both residential and commercial subscribers of the Sunday Ticket to proceed with their lawsuit. They allege that the NFL’s approach to selling game telecasts has stifled competition and violated U.S. antitrust laws. The Sunday Ticket, which was previously offered on DirecTV and is now available through Google’s YouTube TV, broadcasts out-of-market games not typically accessible for free on local CBS or Fox networks. It’s important to note that neither Google nor DirecTV are named as defendants in this case.

The plaintiffs in the lawsuit argue that the NFL’s strategy in handling the distribution of these broadcasts has led to artificially high prices, which, of course, is the point.  The judge’s decision to deny the NFL’s motion for summary judgment sets the stage for a trial. What is at stake?  Billions of dollars.