October 22, 2019

October 22, 2019

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October 21, 2019

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Professional Sports Leagues at Odds With Gaming Industry Over Control of Statistics

For a group of organizations whose very existence is based on fair world-class competition, the competitive spirit of professional sports leagues has drawn its share of challenges over the years, not for their sportsmanship in their arenas, but in their corporate board rooms.

Professional basketball, football and hockey leagues have faced challenges over whether they restrained trade by combining their power to control television broadcasts, merchandizing, and web media rights. The leagues have prevailed, withstanding court scrutiny over whether enabling the concerted actions of their independent members was legal under Section 1 of the Sherman Act.

But if antitrust law professor Marc Edelman is right, another challenge is likely, this time over the rights to control the use of baseball and basketball game statistics, precious data that is vital to the burgeoning online gaming industry.

Edelman, a Professor of Law at the Zicklin School of Business, Baruch College, City University of New York, recently wrote on Forbes.com that decisions by Major League Baseball and the National Basketball Association to combine and centralize ownership of sports data from their respective clubs could spark the next anticompetition challenge. The leagues are requiring their business partners to use only their data. Edelman said this “raises novel legal questions under both sections of the Sherman Act.”

“As the market to offer statistical information to sports gambling providers in the U.S. continues to grow, it will be interesting to see if the emerging centralized league data policies adopted by at least certain U.S. commercial sports leagues will draw the red flag of either regulators or scorned private parties,” Edelman wrote. “While it is far too soon to predict that a challenge to sports data practices will lead to a plaintiffs’ victory—for example, Major League Baseball enjoys at least a narrow exemption from antitrust laws that some argue might apply—these centralized, league-wide data restrictive practices, if implemented in an absolute form, could reasonably give rise to a legal challenge from either the U.S. Department of Justice, a sports gaming provider or perhaps even a large-market U.S. professional sports team.”

One of the leading cases on this issue was handed down by the Supreme Court in 2010 in a case brought by American Needle Inc., a leading producer of branded sports caps, against the National Football League (Am. Needle, Inc. v. NFL, 560 U.S. 183 (U.S. May 24, 2010)).

The issue in American Needle was whether the teams of the NFL, in forming a single licensor of all team intellectual property, constituted improper concerted action. A federal district judge and the Seventh Circuit U.S. Court of Appeals held that Sherman Act Section 1 did not apply because the league, the individual teams, and the newly formed licensing entity acted as a single enterprise to manage IP assets. However, the Supreme Court said the conduct was not categorically outside the coverage of Section 1.

The proper questions to determine whether antitrust laws were violated, the high court ruled, weren’t whether the parties were separate entities or whether two entities had formed a joint venture. The proper question was whether the agreement joined together “independent centers of decision-making” and whether that caused an unreasonable restraint of trade, the Supreme Court determined, saying that “rule of reason” should have been applied by the lower courts.

Pull QuotesThe NFL teams did not possess either the “unitary decision-making quality or the single aggregation of economic power characteristic of independent action,” the high court found. Each team is a substantial, independently owned, and independently managed business. They compete with one another for fans, ticket sales, managers, and players. And, the court said, the teams compete in the market for intellectual property.

“Football teams that need to cooperate are not trapped by antitrust law,” American Needle continues. “The fact that NFL teams share an interest in making the entire league successful and profitable, and that they must cooperate in the production and scheduling of games, provides a perfectly sensible justification for making a host of collective decisions. But the conduct at issue in this case is still concerted activity under the Sherman Act that is subject to Section 1 analysis.”

“When ‘restraints on competition are essential if the product is to be available at all,’ per se rules of illegality are inapplicable, and instead the restraint must be judged according to the flexible Rule of Reason. In such instances, the agreement is likely to survive the Rule of Reason,” American Needle reads.

American Needle is nine years old. Time will tell if Professor Edelman is correct that online gaming companies — which also face both regulatory and anticompetitive scrutiny — will challenge league control of gaming statistics.

Should the gaming industry challenge the leagues it will have to argue either that the Supreme Court was wrong in American Needle, that collective control over statistics is somehow different than control over intellectual property, television broadcasts and web media, or that the specifics of the leagues’ control restrains trade in a way the previous collectivization schemes did not.

Article edited by Tom Hagy for MoginRubin.

© MoginRubin LLP

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About this Author

Timothy Z. LaComb Antitrust Lawyer Mogin Rubin Law Firm
Associate

Mr. LaComb is an Associate in MoginRubin LLP’s San Diego office and his practice focuses on antitrust, unfair competition, and complex business litigation, particularly as they relate to mergers and acquisitions. Prior to joining MoginRubin LLP, Mr. LaComb was an Associate at Robbins Geller Rudman & Dowd LLP where he helped secure several multi-million-dollar recoveries for shareholders in merger-related class action litigation.  Through his extensive experience in complex litigation, he has developed an expertise and proficiency in electronic and other discovery-related issues...

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Jennifer Oliver Antitrust Attorney Morgin Rubin LLP
Partner

Ms. Oliver joined MoginRubin LLP in 2017 after nearly ten years practicing as a complex business litigator in the New York office of Weil, Gotshal & Manges LLP. Jennifer’s practice is focused on antitrust, as well as complex business and investment litigation. Her previous clients include General Electric, Lehman Brothers, Bridgestone, Washington Mutual, The Walt Disney Company, ESPN, The Dow Chemical Company, General Motors, The Port Authority of New York and New Jersey, Forbes, and American Airlines. Jennifer’s experience includes active roles in several high-profile jury trials, serving as lead counsel in complex mediations, and arguing before courts at both the trial and appellate levels. In addition to her merger and cartel work, Jennifer has also litigated trade secrets, RICO conspiracies, securities fraud, unfair trade practices, breaches of contract and privacy cases. A strong advocate for pro bono work, Jennifer was a member of the pro bono team in the seminal Supreme Court case Ashcroft v. Iqbal.

Jennifer earned her B.S. (Business Administration), M.B.A., and J.D. degrees from the University at Buffalo, each with honors, where she also served as the Vice President of the undergraduate student body and was an editor of the Buffalo Law Review and Buffalo Intellectual Property Law Journal. Jennifer is admitted to practice law in the Southern District of New York, Eastern District of New York, Northern District of California, Central District of California, and Southern District of California, and is an IAPP Certified Information Privacy Professional. She has also lived and worked in Tokyo, where she studied international law and worked as a clerk at one of Japan’s largest law firms. Jennifer was recently awarded with the 2018 International Advisory Experts Award for Complex Business Litigation in California.

Jennifer has been an active volunteer with the Junior League since 2015, where she helps spearhead initiatives to improve the lives of transition age foster youth in San Diego.

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