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The Supreme Court Clarifies When Antitrust Law Applies to Joint Ventures in American Needle Inc. v. National Football League, Inc.

Posted in IP Antitrust, Private Litigation

by Jon B. Dubrow, Stephen Wu and Vincent C. van Panhuys

In a unanimous decision issued on May 24, 2010, the Supreme Court of the United States clarified when participants in a joint venture may face antitrust liability for their joint activities.   In American Needle, Inc. v. National Football League, Inc., et al, the Supreme Court ruled that the National Football League (NFL) and its member teams are not immune from the antitrust laws when licensing the teams’ intellectual property rights jointly through a single entity.  Instead, the antitrust laws do apply and the teams’/League’s conduct must be analyzed to determine whether it can be an agreement in restraint of trade violating the antitrust laws.

The American Needle decision has broad application to joint ventures and other collaborations involving competitors across all industries.  This is because the Supreme Court held that participants to a joint venture are not categorically immune from the antitrust laws even if they form one entity to conduct their joint activities.  Rather, the antitrust laws will still apply and courts must apply the “rule of reason,” which requires weighing the pro- and anticompetitive effects of the joint venture’s activities to analyze whether they violate the antitrust laws.

The Supreme Court stated that the test for whether antitrust laws relating to agreements in restraint of trade applies to a joint venture’s conduct focuses on whether the conduct at issue involves separate decision makers whose joint activities would rob the marketplace of “independent centers of decision making” and, thus, actual or potential competition.   To make that determination, the Supreme Court stated that courts should focus on “competitive realities” and whether the participants to the joint venture still have separate competing economic interests that are not necessarily aligned.  Courts should do this even if participants have formed one entity through which they act and even if participation by competitors in the joint venture is necessary to produce a product or service.  The Supreme Court stated the fact that a joint venture that undertakes some conduct for which participation by competitors is required to offer a new product or service enables it to receive rule of reason, rather than per se, analysis, but does not render it immune.  The case was remanded for that rule of reason analysis.

The Supreme Court’s decision, the first decision it has granted in favor of a private antitrust plaintiff since the early 1990s, provides a timely opportunity to remind businesses to reexamine their joint ventures and other collaborations involving competitors that may subject them to risk under the antitrust laws.   Companies should take a fresh look at their participation in these activities and determine whether certain modifications would reduce their risk of liability under the antitrust laws.