Next month, in American Needle Inc v National Football League Inc (No 08/661), the US Supreme Court is expected to revisit its earlier cases on joint ventures and the extent to which they should be protected under competition law.1
Implications for New Zealand
No New Zealand Court has considered the joint venture defence in section 31 of the Commerce Act and there is uncertainty around how it applies to multi party enterprises, and whether it imports any notion of ancillary restraint. Guidance from the US Supreme Court as to how joint venture analysis should be undertaken will be very valuable in this contentious area where an emphasis on form over substance invites abuse, but an over vigorous application may stymie pro competitive activity.
The National Football League (NFL) is an unincorporated not for profit joint venture of 32 football teams, formed in 1920. The need for collaboration in the formation of a league was recognised as necessary with its attendant schedule of games, rules, end of season playoffs and organisation of the Super Bowl.
Despite this degree of cooperation, each team is a separate business with its own players, managers, administrators, and marketers. Each team owns its own intellectual property in its team logos and marks and derives a valuable source of income through branded merchandise. In 2000 the teams collectively provided an exclusive licence to Reebok, eliminating licences with other competing manufacturers.
In its earlier decision in Copperweld Corp v Independence Tube Corp 467 US 752 at 768, the Supreme Court had held that a parent and its wholly owned subsidiary should be treated as a single entity for the purposes of competition law because both entities were essentially subject to unitary control. This meant that the concerted action needed to found liability under the United States' Sherman Act was absent.
The Seventh Circuit in American Needle applied this doctrine to the NFL and found that its conduct was essentially immune from challenge. Specifically, the NFL and its teams could be viewed as a single entity when collectively deciding how to promote NFL football through licensing of the teams’ intellectual property. It is this decision which is now under appeal.
The US Supreme Court will need to consider:
the plethora of inconsistent lower court decisions on joint ventures and how, if at all, they can be reconciled
how integrated an entity has to be before it can be treated as a single entity, and
(potentially) the earlier Texaco Inc v Dagher 547 US 1 (2006) decision in which the Court held that the pricing of an oil joint venture between two competitors was exempt from price fixing, and how broadly that decision should be applied.