BLOOMINGTON, Ind. – A penalty flag thrown by a federal appeals court against the National Football League and DirecTV and their NFL Sunday Ticket package — in the form of an anti-trust ruling — drew upon legal arguments in article written by an Indiana University Kelley School of Business professor.
On August 13, the San Francisco-based 9th U.S. Circuit Court of Appeals said the TV package that millions of fans purchase to watch NFL games may be in violation of the Sherman Antitrust Act, the first federal act that outlawed monopolistic business practices. The divided three-judge panel overruled a trial court’s dismissal of a case brought by a group of NFL Sunday Ticket subscribers four years ago.
In their ruling, judges cited a 2015 article, “Regulating Professional Sports Leagues,” written by Nathaniel Grow, associate professor of business law at Kelley. The ruling and Grow’s article both ask why teams who compete on the gridiron can’t also do so by making their own TV deals.
Grow’s article in Washington and Lee Review examined the four professional sports leagues – the NFL, Major League Baseball, the National Basketball Association and the National Hockey League – and their unregulated monopoly status. He wrote about the inability of federal antitrust law to provide a check on the leagues’ activities, in part due to the “unique level of coordination necessary among their respective teams.”
At the core of last week’s ruling are the NFL’s interlocking agreements that “work together to suppress competition for the sale of professional football game telecasts.” The judges took note of a legal precedent highlighted by Grow in his article. In 1984, the U.S. Supreme Court struck down the National Collegiate Athletic Association’s collective broadcasting activities, which freed conferences and schools to negotiate their own TV deals. Several conferences, including the Big Ten, Southeastern Conference and, this week, the Atlantic Coast Conference, now have their own channel.
The ruling quoted Grow on the decision’s impact, “Commentators documented the changes caused by the increased competition in college football telecasts. ‘With conferences and teams now free to sign their own deals, the number of televised college football games grew exponentially.” Moreover, because college football teams could compete “against one another in the market place, broadcasters collectively pa[y] half as much for the rights to televise a larger number of games than the NCAA had previously received for its collective package.”
Grow (pictured right) believes that by preventing teams from individually licensing their broadcast rights nationally or over the Internet, the NFL demands significantly higher fees from TV networks and consumers than what would be would attainable in a competitive marketplace. This also subjects viewers to “arcane and outdated blackout provisions.”
Judge Sandra Segal Ikuta, made note of these parallels and precedent in the opinion, “Just as the University of Oklahoma was forbidden from increasing the number of telecasts made of its games, so too are the Seattle Seahawks forbidden from selling their telecast rights independently from the NFL.”
The NFL and DirecTV have partnered to make NFL Sunday Ticket the exclusive provider of live telecasts of out-of-town games since 1994. Fans, particularly subscribers, should not be concerned about watching the coming season’s slate of games. The case will go back to the trial court and move forward towards trial. It was dismissed during early stages in the proceedings. Parties will have to go back and go through the discovery process, so a trial likely is years away. A possibility is that the Ninth Circuit’s ruling will now pressure the NFL into settling the case.
“Such a settlement would be unlikely to result in a complete dismantling of the Sunday Ticket package and immediate competition between NFL teams for television rights, but could offer fans some more modest benefits, such as letting out-of-market fans purchase a package for only their favorite team’s games (instead of all 32 teams) at a lower price,” Grow said. “This was the primary outcome of a similar lawsuit against MLB a couple years back, after the league failed to have the case dismissed by the trial and appellate courts.
“The decision last week certainly has implications for MLS and the WNBA, in addition to the NFL, NBA, NHL, and MLB,” he added. “Both MLS (Direct Kick) and the WNBA (League Pass) have their own versions of the Sunday Ticket package. One thing that helps those other leagues is that — as far as I am aware — they do not exclusively license those packages to a single television provider in the same way that the NFL makes Sunday Ticket exclusively available via DirecTV, which is one of the key points in the Sunday Ticket case.
“In short, Sunday Ticket is uniquely at risk of antitrust challenge due to its exclusive distribution, but all of these packages are potentially challengeable to the extent that the league unilaterally sells the rights to the broadcasts rather than letting the individual teams compete.”