The U.S. Supreme Court ruled in favor of plaintiff American Needle and a more expansive view of the scope of antitrust law today with what may well turn out to be a landmark opinion in the much anticipated case of American Needle, Inc. v. National Football League.

The decision rejects the lower courts’ broad grant of immunity to joint ventures from the conspiracy prohibition of § 1 of the Sherman Antitrust Act.

American Needle, the plaintiff-petitioner and a manufacturer of NFL-licensed headwear, claimed that the NFL acted anticompetitively by granting Reebok the exclusive license for certain NFL paraphernalia.  The trial court granted summary judgment to the NFL, and the U.S. Court of Appeals for the Seventh Circuit affirmed.  Both lower courts held that, in licensing individual team and NFL trademarks, the NFL was operating as a single entity under antitrust law – as opposed to multiple, collectively acting ball clubs – and thus was immune from the conspiracy prohibition of § 1 of the Sherman Act. 

The Supreme Court held unanimously that the NFL clubs are not immune from the conspiracy prohibition of the Sherman Act – at the very least with respect to licensing their intellectual property.  The Court’s language also indicates that the Court likely would hold the NFL clubs subject to the conspiracy prohibition with respect to the full panoply of the NFL’s operations.

The Court rejected the NFL’s position that, because everything the NFL does promotes NFL professional football, the NFL is really an integrated single entity immune from the conspiracy prohibition.  The Court also rejected the middle-of-the-road rule suggested by the Department of Justice’s Antitrust Division, which would not apply the conspiracy prohibition if “the teams and the league . . . have effectively merged the relevant aspects of their operations.” 

Most importantly, the Court took the opportunity to restate and clarify the principles governing when to apply the Sherman Act’s conspiracy prohibition.  Thus, American Needle will govern the application of antitrust law in all industries, not just professional sports, as evidenced by the submission of an amicus brief by Visa and MasterCard in the payments industry.  (Visa and MasterCard are public corporations owned by separate legal entities, including banks that were members of Visa and MasterCard when Visa and MasterCard were organized as joint ventures.) click here for more »

Antitrust enforcement is not going mobile, at least as of today.

On Friday, the Federal Trade Commission decided not to challenge to Google’s $750 million purchase of AdMob, which places electronic advertisements on cell phones and other mobile devices.

According to the FTC, the decision was “a difficult one because the parties currently are the two leading mobile advertising networks, and the Commission was concerned about the lost of head-to-head competition between them.”  What turned the FTC around was Apple’s December purchase of Quattro, a company that competes with AdMob, along with Apple’s subsequent launching of its own mobile advertising program.  That program, called iAd, will focus on placing ads on Apple’s rabidly successful iPhone, iPod, and iPad mobile devices. 

This is not a surprising decision, given how new and fluid the mobile market place is, and how many competitors already exist.  Aside from AdMob (founded only four years ago) and Apple, other companies in the space include Apploop, Bango, Smaato, Approlix, Adfonic, Millenial Media, JumpTag, PurpleTalk, Greystripe, Medialets, InMobi, MobGold, uLocate, 4INFO. 

Despite the Commission’s decision not to block the Google-AdMob merger, the FTC did state that the mobile advertising space does constitute a market – albeit an emerging one.  And the FTC also indicated that it will keep a close eye on both Google and Apple.  Neither company should be surprised if they hear from the FTC again.

The FTC is suing Dun & Bradstreet to challenge its February 2009 acquisition of QED, a division of Scholastic that provides kindergarten through twelfth-grade educational marketing databases.

The combination of MDR, Dun & Bradstreet’s subsidiary, and QED was a merger-to-monopoly, giving the combined entity more than 90 percent of the market for K-12 educational marketing data.  The deal glided under the radar given it’s valuation of $29 million which falls below the HSR reporting thresholds.  But the FTC is now seeking to unravel the merger given its apparent anticompetitive effects. 

Despite its relatively low dollar value, this transaction dramatically decreased competition in the marketplace,” according to Richard Feinstein, Director of the FTC’s Bureau of Competition.  “When Dun & Bradstreet acquired QED, it bought its closest competitor and created a monopoly.  That’s going to get the FTC’s attention every time.”

So buyer beware.  Just because a transaction doesn’t trigger an HSR filing doesn’t mean the parties can go on their merry way.  A merger analysis should be performed even for smaller, non-reportable transactions to assess whether the post-transaction market share, barriers to entry and other indicators will set off alarm bells for regulators.

The Antitrust Division of the U.S. Department of Justice is asking the National Collegiate Athletic Association to explain its scholarship policy in an exam that could lead to a failing grade for the NCAA’s ban on multi-year athletic scholarships.

The NCAA’s rule requires schools to review students’ eligibility for athletic scholarships every year, up to a maximum of five years of eligibility – automatic multi-year scholarships are not allowed.  The NCAA’s ban on multi-year athletic scholarships arguably restrains competition among NCAA colleges and universities for the best players.  The concern is that given the with millions in ticket and television revenues at stake – the ban on multi-year scholarships could be a significant restraint of trade in violation of Section 1 of the Sherman Act.

The NCAA has responded that scholarships are a “merit” award and annual review helps to guarantee that scholarships in each year go to the students who most deserve them.  The five-year maximum, they said, corresponds to a student’s maximum eligibility to participate in college sports under NCAA’s ambit.  The Justice Department has not commented publicly on the investigation.

NCAA is no stranger to investigations and suits under Section 1.  It has contended with many antitrust challenges to its detailed rules about scholarships, coaching salaries, and other areas from the mid-1980s to today.  In 2008, NCAA settled an antitrust class action brought by a class of about 13,000 college football and basketball players.  The players argued that the organization’s cap on scholarship amounts – which forced many players on full scholarships to pay about $2,500 a year in out of pocket costs – amounted to a maximum price-fixing agreement among NCAA member schools.  The organization agreed to pay students back for the expenses they incurred and raise the maximum scholarship going forward.

Section 1 suits against NCAA highlight the conflict between the group’s mission to maintain the amateur status of student athletes and the enormous commercial pressure placed on colleges and universities to field the best teams possible.  As in other Section 1 suits where “rule of reason” analysis is used, NCAA’s rules tend to be upheld when they relate most closely to legitimate goals apart from restricting competition – in the NCAA’s case, preserving amateurism and differentiating college from professional sports as an entertainment product.  By this rationale, scholarship rules for students are often upheld, while caps on coaches’ salaries have been struck down as unlawful restraints on trade.

The Federal Trade Commission will extend by up to two weeks its decision on whether to formally investigate Google for its acquisition of mobile web-advertising startup AdMob.

According to the New York Times, the federal antitrust enforcer initially planned to make a decision on Monday, but has requested the extra time in part to consider whether Apple’s own entry into mobile advertising affects antitrust concerns.  According to the Times, many in the FTC favor action against Google, and a decision may come as soon as this Friday.

The concern stems from whether Google, already the largest seller of advertisements on the traditional internet, will use its acquisition of AdMob to try to dominate the market for advertisements on cell phones and other mobile devices.  That area of advertising is young and has many competitors, but is growing at a potentially explosive rate.

Google announced its acquisition of AdMob last November, but is still waiting for the green light from the FTC.  At the same time, Apple has also entered the market.  First, it announced in January that it was buying Quattro, a competitor to AdMob.  Second, Apple recently announced its creation of its iAd program, which will be the exclusive means of placing advertisements in applications that run on its wildly popular iPhones, iPods, and iPads.  To give a sense of Apple’s own popularity, the company has sold approximately one million iPads in just one month.  The FTC seems to be looking at the possibility that Apple’s own success, or potential success, in the mobile advertising space will counteract any advantage that Google might otherwise have.

Ultimately, whether the FTC investigates may hinge on whether the FTC decides to recognize a specialized market for advertising on mobile devices.  Google argues that the mobile advertising space is “fragmented,” and that the area is too new to recognize as a separate market from standard web advertising.  The FTC, on the other hand, is likely concerned that Google can use its large scale in traditional web advertising to convince advertisers to place mobile ads with Google and AdMob.  The FTC may also be concerned that Google can use network effects to its advantage, since having more advertisers allows it to fine-tune its formulas for selling and placing ads, which then lets it sell still more ads.