American Needle, Inc. v. National Football League

(Slip Opinion) OCTOBER TERM, 2009 1

Syllabus

NOTE: Where it is feasible, a syllabus (headnote) will be released, as is

being done in connection with this case, at the time the opinion is issued.

The syllabus constitutes no part of the opinion of the Court but has been

prepared by the Reporter of Decisions for the convenience of the reader.

See United States v. Detroit Timber & Lumber Co., 200 U. S. 321, 337.

SUPREME COURT OF THE UNITED STATES

Syllabus

AMERICAN NEEDLE, INC. v. NATIONAL FOOTBALL

LEAGUE ET AL.

CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR

THE SEVENTH CIRCUIT

No. 08–661. Argued January 13, 2010—Decided May 24, 2010

Respondent National Football League (NFL) is an unincorporated asso

ciation of 32 separately owned professional football teams, also re

spondents here. The teams, each of which owns its own name, colors,

logo, trademarks, and related intellectual property, formed respon

dent National Football League Properties (NFLP) to develop, license,

and market that property. At first, NFLP granted nonexclusive li

censes to petitioner and other vendors to manufacture and sell team

labeled apparel. In December 2000, however, the teams authorized

NFLP to grant exclusive licenses. NFLP granted an exclusive license

to respondent Reebok International Ltd. to produce and sell trade

marked headwear for all 32 teams. When petitioner’s license was not

renewed, it filed this action alleging that the agreements between re

spondents violated the Sherman Act, §1 of which makes “[e]very con

tract, combination . . . or, conspiracy, in restraint of trade” illegal.

Respondents answered that they were incapable of conspiring within

§1’s meaning because the NFL and its teams are, in antitrust law

jargon, a single entity with respect to the conduct challenged. The

District Court granted respondents summary judgment, and the Sev

enth Circuit affirmed.

Held: The alleged conduct related to licensing of intellectual property

constitutes concerted action that is not categorically beyond §1’s cov

erage. Pp. 4–20.

(a) The meaning of “contract, combination . . . , or, conspiracy” in §1

of the Sherman Act is informed by the Act’s “ ‘basic distinction be

tween concerted and independent action.’ ” Copperweld Corp. v. In

dependence Tube Corp., 467 U. S. 752, 767. Section 1 “treat[s] con

certed behavior more strictly than unilateral behavior,” id., at 768,

2 AMERICAN NEEDLE, INC. v. NATIONAL

FOOTBALL LEAGUE

Syllabus

because, unlike independent action, “[c]oncerted activity inherently is

fraught with anticompetitive risk” insofar as it “deprives the market

place of independent centers of decisionmaking that competition as

sumes and demands,” id., at 768–769. And because concerted action

is discrete and distinct, a limit on such activity leaves untouched a

vast amount of business conduct. That creates less risk of deterring

a firm’s necessary conduct and leaves courts to examine only discrete

agreements. An arrangement must therefore embody concerted ac

tion in order to be a “contract, combination . . . or, conspiracy” under

§1. Pp. 4–6.

(b) In determining whether there is concerted action under §1, the

Court has eschewed formalistic distinctions, such as whether the al

leged conspirators are legally distinct entities, in favor of a functional

consideration of how they actually operate. The Court has repeatedly

found instances in which members of a legally single entity violated

§1 when the entity was controlled by a group of competitors and

served, in essence, as a vehicle for ongoing concerted activity. See,

e.g., United States v. Sealy, Inc., 388 U. S. 350, 352–356. Conversely,

the Court has found that although the entities may be “separate” for

purposes of incorporation or formal title, if they are controlled by a

single center of decisionmaking and they control a single aggregation

of economic power, an agreement between them does not constitute a

“contract, combination . . . or, conspiracy.” Copperweld, 467 U. S., at

769. Pp. 6–10.

(c) The relevant inquiry is therefore one of substance, not form,

which does not turn on whether the alleged parties to contract, com

bination, or conspiracy are part of a legally single entity or seem like

one firm or multiple firms in any metaphysical sense. The inquiry is

whether the agreement in question joins together “separate economic

actors pursuing separate economic interests,” Copperweld, 467 U. S.,

at 768, such that it “deprives the marketplace of independent centers

of decisionmaking,” id., at 769, and therefore of diversity of entrepre

neurial interests and thus of actual or potential competition. If it

does, then there is concerted action covered by §1, and the court must

decide whether the restraint of trade is unreasonable and therefore

illegal. Pp. 10–11.

(d) The NFL teams do not possess either the unitary decisionmak

ing quality or the single aggregation of economic power characteristic

of independent action. Each of them is a substantial, independently

owned, independently managed business, whose “general corporate

actions are guided or determined” by “separate corporate conscious

nesses,” and whose “objectives are” not “common.” Copperweld, 467

U. S., at 771. They compete with one another, not only on the play

ing field, but to attract fans, for gate receipts, and for contracts with

Cite as: 560 U. S. ____ (2010) 3

Syllabus

managerial and playing personnel. See, e.g., Brown v. Pro Football,

Inc., 518 U. S. 231, 249. Directly relevant here, the teams are poten

tially competing suppliers in the market for intellectual property.

When teams license such property, they are not pursuing the “com

mon interests of the whole” league, but, instead, the interests of each

“corporation itself.” Copperweld, 467 U. S., at 770. It is not disposi

tive, as respondents argue, that, by forming NFLP, they have formed

a single entity, akin to a merger, and market their NFL brands

through a single outlet. Although the NFL respondents may be simi

lar in some sense to a single enterprise, they are not similar in the

relevant functional sense. While teams have common interests such

as promoting the NFL brand, they are still separate, profit

maximizing entities, and their interests in licensing team trade

marks are not necessarily aligned. Nor does it matter that the teams

may find the alleged cooperation necessary to compete against other

forms of entertainment. Although decisions made by NFLP are not

as easily classified as concerted activity, the NFLP’s decisions about

licensing the teams’ separately owned intellectual property are con

certed activity and thus covered by §1 for the same reason that deci

sions made directly by the 32 teams are covered by §1. In making the

relevant licensing decisions, NFLP is “an instrumentality” of the

teams. Sealy, 388 U. S., at 352–354. Pp. 11–17.

(e) Football teams that need to cooperate are not trapped by anti

trust law. The fact that the NFL teams share an interest in making

the entire league successful and profitable, and that they must coop

erate to produce games, provides a perfectly sensible justification for

making a host of collective decisions. Because some of these re

straints on competition are necessary to produce the NFL’s product,

the Rule of Reason generally should apply, and teams’ cooperation is

likely to be permissible. And depending upon the activity in ques

tion, the Rule of Reason can at times be applied without detailed

analysis. But the activity at issue in this case is still concerted activ

ity covered for §1 purposes. Pp. 18–19.

538 F. 3d 736, reversed and remanded.

STEVENS, J., delivered the opinion for a unanimous Court.

Cite as: 560 U. S. ____ (2010) 1

Opinion of the Court

NOTICE: This opinion is subject to formal revision before publication in the

preliminary print of the United States Reports. Readers are requested to

notify the Reporter of Decisions, Supreme Court of the United States, Wash­

ington, D. C. 20543, of any typographical or other formal errors, in order

that corrections may be made before the preliminary print goes to press.

SUPREME COURT OF THE UNITED STATES

_________________

No. 08–661

_________________

AMERICAN NEEDLE, INC., PETITIONER v.

NATIONAL FOOTBALL LEAGUE ET AL.

ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF

APPEALS FOR THE SEVENTH CIRCUIT

[May 24, 2010]

JUSTICE STEVENS delivered the opinion of the Court.

“Every contract, combination in the form of a trust or

otherwise, or, conspiracy, in restraint of trade” is made

illegal by §1 of the Sherman Act, ch. 647, 26 Stat. 209, as

amended, 15 U. S. C. §1. The question whether an ar­

rangement is a contract, combination, or conspiracy is

different from and antecedent to the question whether it

unreasonably restrains trade. This case raises that ante­

cedent question about the business of the 32 teams in the

National Football League (NFL) and a corporate entity

that they formed to manage their intellectual property.

We conclude that the NFL’s licensing activities constitute

concerted action that is not categorically beyond the cov­

erage of §1. The legality of that concerted action must be

judged under the Rule of Reason.

I

Originally organized in 1920, the NFL is an unincorpo­

rated association that now includes 32 separately owned

professional football teams.1 Each team has its own name,

——————

1 The NFL was founded in Canton, Ohio as the “American Profes­

2 AMERICAN NEEDLE, INC. v. NATIONAL

FOOTBALL LEAGUE

Opinion of the Court

colors, and logo, and owns related intellectual property.

Like each of the other teams in the league, the New Or­

leans Saints and the Indianapolis Colts, for example, have

their own distinctive names, colors, and marks that are

well known to millions of sports fans.

Prior to 1963, the teams made their own arrangements

for licensing their intellectual property and marketing

trademarked items such as caps and jerseys. In 1963, the

teams formed National Football League Properties (NFLP)

to develop, license, and market their intellectual property.

Most, but not all, of the substantial revenues generated by

NFLP have either been given to charity or shared equally

among the teams. However, the teams are able to and

have at times sought to withdraw from this arrangement.

Between 1963 and 2000, NFLP granted nonexclusive

licenses to a number of vendors, permitting them to manu­

facture and sell apparel bearing team insignias. Peti­

tioner, American Needle, Inc., was one of those licensees.

In December 2000, the teams voted to authorize NFLP to

grant exclusive licenses, and NFLP granted Reebok Inter­

national Ltd. an exclusive 10-year license to manufacture

and sell trademarked headwear for all 32 teams. It there­

after declined to renew American Needle’s nonexclusive

license.

American Needle filed this action in the Northern Dis­

trict of Illinois, alleging that the agreements between the

NFL, its teams, NFLP, and Reebok violated §§1 and 2 of

the Sherman Act. In their answer to the complaint, the

defendants averred that the teams, NFL, and NFLP were

incapable of conspiring within the meaning of §1 “because

they are a single economic enterprise, at least with respect

——————

sional Football Association.” United States Football League v. National

Football League, 842 F. 2d 1335, 1343 (CA2 1988). It took its current

name in 1922. Ibid. Forty-one franchises failed in the first forty-one

years of the League’s existence. Ibid.

Cite as: 560 U. S. ____ (2010) 3

Opinion of the Court

to the conduct challenged.” App. 99. After limited discov­

ery, the District Court granted summary judgment on the

question “whether, with regard to the facet of their opera­

tions respecting exploitation of intellectual property

rights, the NFL and its 32 teams are, in the jargon of

antitrust law, acting as a single entity.” American Needle,

Inc. v. New Orleans La. Saints, 496 F. Supp. 2d 941, 943

(2007). The court concluded “that in that facet of their

operations they have so integrated their operations that

they should be deemed a single entity rather than joint

ventures cooperating for a common purpose.” Ibid.

The Court of Appeals for the Seventh Circuit affirmed.

The panel observed that “in some contexts, a league seems

more aptly described as a single entity immune from

antitrust scrutiny, while in others a league appears to be a

joint venture between independently owned teams that is

subject to review under §1.” 538 F. 3d, 736, 741 (2008).

Relying on Circuit precedent, the court limited its inquiry

to the particular conduct at issue, licensing of teams’

intellectual property. The panel agreed with petitioner

that “when making a single-entity determination, courts

must examine whether the conduct in question deprives

the marketplace of the independent sources of economic

control that competition assumes.” Id., at 742. The court,

however, discounted the significance of potential competi­

tion among the teams regarding the use of their intellec­

tual property because the teams “can function only as one

source of economic power when collectively producing NFL

football.” Id., at 743. The court noted that football itself

can only be carried out jointly. See ibid. (“Asserting that

a single football team could produce a football game . . . is

a Zen riddle: Who wins when a football team plays itself ”).

Moreover, “NFL teams share a vital economic interest in

collectively promoting NFL football . . . [to] compet[e] with

other forms of entertainment.” Ibid. “It thus follows,” the

court found, “that only one source of economic power con­

4 AMERICAN NEEDLE, INC. v. NATIONAL

FOOTBALL LEAGUE

Opinion of the Court

trols the promotion of NFL football,” and “it makes little

sense to assert that each individual team has the author­

ity, if not the responsibility, to promote the jointly pro­

duced NFL football.” Ibid. Recognizing that NFL teams

have “license[d] their intellectual property collectively”

since 1963, the court held that §1 did not apply. Id., at

744.

We granted certiorari. 557 U. S. __ (2009).

II

As the case comes to us, we have only a narrow issue to

decide: whether the NFL respondents are capable of en­

gaging in a “contract, combination . . . , or conspiracy” as

defined by §1 of the Sherman Act, 15 U. S. C. §1, or, as we

have sometimes phrased it, whether the alleged activity

by the NFL respondents “must be viewed as that of a

single enterprise for purposes of §1.” Copperweld Corp. v.

Independence Tube Corp., 467 U. S. 752, 771 (1984).

Taken literally, the applicability of §1 to “every contract,

combination . . . or conspiracy” could be understood to

cover every conceivable agreement, whether it be a group

of competing firms fixing prices or a single firm’s chief

executive telling her subordinate how to price their com­

pany’s product. But even though, “read literally,” §1

would address “the entire body of private contract,” that is

not what the statute means. National Soc. of Professional

Engineers v. United States, 435 U. S. 679, 688 (1978); see

also Texaco Inc. v. Dagher, 547 U. S. 1, 5 (2006) (“This

Court has not taken a literal approach to this language”);

cf. Board of Trade of Chicago v. United States, 246 U. S.

231, 238 (1918) (reasoning that the term “restraint of

trade” in §1 cannot possibly refer to any restraint on com­

petition because “[e]very agreement concerning trade,

every regulation of trade, restrains. To bind, to restrain,

is of their very essence”). Not every instance of co-

operation between two people is a potential “contract,

Cite as: 560 U. S. ____ (2010) 5

Opinion of the Court

combination . . . , or conspiracy, in restraint of trade.” 15

U. S. C. §1.

The meaning of the term “contract, combination . . . or

conspiracy” is informed by the “ ‘basic distinction’ ” in the

Sherman Act “ ‘between concerted and independent ac­

tion’ ” that distinguishes §1 of the Sherman Act from §2.

Copperweld, 467 U. S., at 767 (quoting Monsanto Co. v.

Spray-Rite Service Corp., 465 U. S. 752, 761 (1984)).

Section 1 applies only to concerted action that restrains

trade. Section 2, by contrast, covers both concerted and

independent action, but only if that action “monopolize[s],”

15 U. S. C. §2, or “threatens actual monopolization,” Cop

perweld, 467 U. S., at 767, a category that is narrower

than restraint of trade. Monopoly power may be equally

harmful whether it is the product of joint action or indi­

vidual action.

Congress used this distinction between concerted and

independent action to deter anticompetitive conduct and

compensate its victims, without chilling vigorous competi­

tion through ordinary business operations. The distinc­

tion also avoids judicial scrutiny of routine, internal busi­

ness decisions.

Thus, in §1 Congress “treated concerted behavior more

strictly than unilateral behavior.” Id., at 768. This is so

because unlike independent action, “[c]oncerted activity

inherently is fraught with anticompetitive risk” insofar as

it “deprives the marketplace of independent centers of

decisionmaking that competition assumes and demands.”

Id., at 768–769. And because concerted action is discrete

and distinct, a limit on such activity leaves untouched a

vast amount of business conduct. As a result, there is less

risk of deterring a firm’s necessary conduct; courts need

only examine discrete agreements; and such conduct may

be remedied simply through prohibition.2 See Areeda &

——————

2 If Congress prohibited independent action that merely restrains

6 AMERICAN NEEDLE, INC. v. NATIONAL

FOOTBALL LEAGUE

Opinion of the Court

Hovenkamp ¶1464c, at 206. Concerted activity is thus

“judged more sternly than unilateral activity under §2,”

Copperweld, 467 U. S., at 768. For these reasons, §1

prohibits any concerted action “in restraint of trade or

commerce,” even if the action does not “threate[n] monopo­

lization,” Ibid. And therefore, an arrangement must

embody concerted action in order to be a “contract, combi­

nation . . . or conspiracy” under §1.

III

We have long held that concerted action under §1 does

not turn simply on whether the parties involved are le­

gally distinct entities. Instead, we have eschewed such

formalistic distinctions in favor of a functional considera­

tion of how the parties involved in the alleged anticom­

petitive conduct actually operate.

As a result, we have repeatedly found instances in

which members of a legally single entity violated §1 when

the entity was controlled by a group of competitors and

served, in essence, as a vehicle for ongoing concerted

activity. In United States v. Sealy, Inc., 388 U. S. 350

(1967), for example, a group of mattress manufacturers

operated and controlled Sealy, Inc., a company that li­

censed the Sealy trademark to the manufacturers, and

——————

trade (even if it does not threaten monopolization), that prohibition

could deter perfectly competitive conduct by firms that are fearful of

litigation costs and judicial error. See Copperweld, 467 U. S., at 768

(“Judging unilateral conduct in this manner reduces the risk that the

antitrust laws will dampen the competitive zeal of a single aggressive

competitor”); cf. United States v. United States Gypsum Co., 438 U. S.

422, 441 (1978) (“[S]alutary and procompetitive conduct . . . might be

shunned by businessmen who chose to be excessively cautious in the

face of uncertainty”). Moreover, if every unilateral action that re­

strained trade were subject to antitrust scrutiny, then courts would be

forced to judge almost every internal business decision. See 7 P.

Areeda & H. Hovenkamp, Antitrust Law ¶1464c, at 206 (2d ed. 2003)

(hereinafter Areeda & Hovenkamp) (unilateral behavior is “often

difficult to evaluate or remedy”).

Cite as: 560 U. S. ____ (2010) 7

Opinion of the Court

dictated that each operate within a specific geographic

area. Id., at 352–353. The Government alleged that the

licensees and Sealy were conspiring in violation of §1, and

we agreed. Id., at 352–354. We explained that “[w]e seek

the central substance of the situation” and therefore “we

are moved by the identity of the persons who act, rather

than the label of their hats.” Id., at 353. We thus held

that Sealy was not a “separate entity, but . . . an instru­

mentality of the individual manufacturers.” Id., at 356.

In similar circumstances, we have found other formally

distinct business organizations covered by §1. See, e.g.,

Northwest Wholesale Stationers, Inc. v. Pacific Stationery

& Printing Co., 472 U. S. 284 (1985); National Collegiate

Athletic Assn. v. Board of Regents of Univ. of Okla., 468

U. S. 85 (1984) (NCAA); United States v. Topco Associates,

Inc., 405 U. S. 596, 609 (1972); Associated Press v. United

States, 326 U. S. 1 (1945); id., at 26 (Frankfurter, J., con­

curring); United States v. Terminal Railroad Assn. of St.

Louis, 224 U. S. 383 (1912); see also Rock, Corporate Law

Through an Antitrust Lens, 92 Colum. L. Rev. 497, 506–

510 (1992) (discussing cases). We have similarly looked

past the form of a legally “single entity” when competitors

were part of professional organizations3 or trade groups.4

Conversely, there is not necessarily concerted action

simply because more than one legally distinct entity is

involved. Although, under a now-defunct doctrine known

as the “intraenterprise conspiracy doctrine,” we once

treated cooperation between legally separate entities as

——————

3 See, e.g., FTC v. Indiana Federation of Dentists, 476 U. S. 447

(1986); Arizona v. Maricopa County Medical Soc., 457 U. S. 332 (1982);

National Soc. of Professional Engineers v. United States, 435 U. S. 679

(1978); Goldfarb v. Virginia State Bar, 421 U. S. 773 (1975).

4 See, e.g., Allied Tube & Conduit Corp. v. Indian Head, Inc., 486

U. S. 492 (1988); Radiant Burners, Inc. v. Peoples Gas Light & Coke

Co., 364 U. S. 656 (1961) (per curiam); Fashion Originators’ Guild of

America, Inc. v. FTC, 312 U. S. 457 (1941).

8 AMERICAN NEEDLE, INC. v. NATIONAL

FOOTBALL LEAGUE

Opinion of the Court

necessarily covered by §1, we now embark on a more

functional analysis.

The roots of this functional analysis can be found in the

very decision that established the intraenterprise conspir­

acy doctrine. In United States v. Yellow Cab Co., 332 U. S.

218 (1947), we observed that “corporate interrelationships

. . . are not determinitive of the applicability of the

Sherman Act” because the Act “is aimed at substance

rather than form.” Id., at 227. We nonetheless held that

cooperation between legally separate entities was neces­

sarily covered by §1 because an unreasonable restraint of

trade “may result as readily from a conspiracy among

those who are affiliated or integrated under common

ownership as from a conspiracy among those who are

otherwise independent.” Ibid.; see also Kiefer-Stewart Co.

v. Joseph E. Seagram & Sons, Inc., 340 U. S. 211, 215

(1951).

The decline of the intraenterprise conspiracy doctrine

began in Sunkist Growers, Inc. v. Winckler & Smith Citrus

Products Co., 370 U. S. 19 (1962). In that case, several

agricultural cooperatives that were owned by the same

farmers were sued for violations of §1 of the Sherman Act.

Id., at 24–25. Applying a specific immunity provision for

agricultural cooperatives, we held that the three coopera­

tives were “in practical effect” one “organization,” even

though the controlling farmers “have formally organized

themselves into three separate legal entities.” Id., at 29.

“To hold otherwise,” we explained, “would be to impose

grave legal consequences upon organizational distinctions

that are of de minimis meaning and effect” insofar as “use

of separate corporations had [no] economic significance.”

Ibid.

Next, in United States v. Citizens & Southern Nat.

Bank, 422 U. S. 86 (1975), a large bank, Citizens and

Southern (C&S), formed a holding company that operated

de facto suburban branch banks in the Atlanta area

Cite as: 560 U. S. ____ (2010) 9

Opinion of the Court

through ownership of the maximum amount of stock in

each local branch that was allowed by law, “ownership of

much of the remaining stock by parties friendly to C&S,

use by the suburban banks of the C&S logogram and all of

C&S’s banking services, and close C&S oversight of the

operation and governance of the suburban banks.” Id., at

89 (footnote omitted). The Government challenged the

cooperation between the banks. In our analysis, we ob­

served that “ ‘corporate interrelationships . . . are not

determinative,’ ” id., at 116, “looked to economic sub­

stance,” and observed that “because the sponsored banks

were not set up to be competitors, §1 did not compel them

to compete.” Areeda & Hovenkamp ¶1463, at 200–201;

see also Citizens & Southern, 422 U. S., at 119–120;

Areeda, Intraenterprise Conspiracy in Decline, 97 Harv.

L. Rev. 451, 461 (1983).

We finally reexamined the intraenterprise conspiracy

doctrine in Copperweld Corp. v. Independence Tube Corp.,

467 U. S. 752 (1984), and concluded that it was inconsis­

tent with the “ ‘basic distinction between concerted and

independent action.’ ” Id., at 767. Considering it “per­

fectly plain that an internal agreement to implement a

single, unitary firm’s policies does not raise the antitrust

dangers that §1 was designed to police,” id., at 769, we

held that a parent corporation and its wholly owned sub­

sidiary “are incapable of conspiring with each other for

purposes of §1 of the Sherman Act,” id., at 777. We ex­

plained that although a parent corporation and its wholly

owned subsidiary are “separate” for the purposes of incor­

poration or formal title, they are controlled by a single

center of decisionmaking and they control a single aggre­

gation of economic power. Joint conduct by two such

entities does not “depriv[e] the marketplace of independ­

ent centers of decisionmaking,” id., at 769, and as a re­

sult, an agreement between them does not constitute a

“contract, combination . . . or conspiracy” for the purposes

10 AMERICAN NEEDLE, INC. v. NATIONAL

FOOTBALL LEAGUE

Opinion of the Court

of §1.5

IV

As Copperweld exemplifies, “substance, not form, should

determine whether a[n] . . . entity is capable of conspiring

under §1.” 467 U. S., at 773, n. 21. This inquiry is some­

times described as asking whether the alleged conspira­

tors are a single entity. That is perhaps a misdescription,

however, because the question is not whether the defen­

dant is a legally single entity or has a single name; nor is

the question whether the parties involved “seem” like one

firm or multiple firms in any metaphysical sense. The key

is whether the alleged “contract, combination . . . , or

conspiracy” is concerted action—that is, whether it joins

together separate decisionmakers. The relevant inquiry,

therefore, is whether there is a “contract, combination . . .

or conspiracy” amongst “separate economic actors pursu­

ing separate economic interests,” id., at 769, such that the

agreement “deprives the marketplace of independent

centers of decisionmaking,” ibid., and therefore of “diver­

sity of entrepreneurial interests,” Fraser v. Major League

Soccer, L. L. C., 284 F. 3d 47, 57 (CA1 2002) (Boudin,

C. J.), and thus of actual or potential competition, see

Freeman v. San Diego Assn. of Realtors, 322 F. 3d 1133,

1148–1149 (CA9 2003) (Kozinski, J.); Rothery Storage &

Van Co. v. Atlas Van Line, Inc., 792 F. 2d 210, 214–215

(CADC 1986) (Bork, J.); see also Areeda & Hovenkamp

¶1462b, at 193–194 (noting that the “central evil ad­

——————

5 This focus on “substance, not, form,” Copperweld, 467 U. S., at 773,

n. 21, can also be seen in our cases about whether a company and its

agent are capable of conspiring under §1. See, e.g., Simpson v. Union

Oil Co. of Cal., 377 U. S. 13, 20–21 (1964); see also E. Elhauge & D.

Geradin, Global Antitrust Law and Economics 787–788, and n. 7 (2007)

(hereinafter Elhauge & Geradin) (explaining the functional difference

between Simpson and United States v. General Elec. Co., 272 U. S. 476

(1926), in which we treated a similar agreement as beyond the reach of

§1).

Cite as: 560 U. S. ____ (2010) 11

Opinion of the Court

dressed by Sherman Act §1” is the “elimin[ation of] compe­

tition that would otherwise exist”).

Thus, while the president and a vice president of a firm

could (and regularly do) act in combination, their joint

action generally is not the sort of “combination” that §1 is

intended to cover. Such agreements might be described as

“really unilateral behavior flowing from decisions of a

single enterprise.” Copperweld, 467 U. S., at 767. Nor, for

this reason, does §1 cover “internally coordinated conduct

of a corporation and one of its unincorporated divisions,”

id., at 770, because “[a] division within a corporate struc­

ture pursues the common interests of the whole,” ibid.,

and therefore “coordination between a corporation and its

division does not represent a sudden joining of two inde­

pendent sources of economic power previously pursuing

separate interests,” id., at 770–771. Nor, for the same

reasons, is “the coordinated activity of a parent and its

wholly owned subsidiary” covered. See id., at 771. They

“have a complete unity of interest” and thus “[w]ith or

without a formal ‘agreement,’ the subsidiary acts for the

benefit of the parent, its sole shareholder.” Ibid.

Because the inquiry is one of competitive reality, it is

not determinative that two parties to an alleged §1 viola­

tion are legally distinct entities. Nor, however, is it de­

terminative that two legally distinct entities have organ­

ized themselves under a single umbrella or into a

structured joint venture. The question is whether the

agreement joins together “independent centers of deci­

sionmaking.” Id., at 769. If it does, the entities are capa­

ble of conspiring under §1, and the court must decide

whether the restraint of trade is an unreasonable and

therefore illegal one.

V

The NFL teams do not possess either the unitary deci­

sionmaking quality or the single aggregation of economic

12 AMERICAN NEEDLE, INC. v. NATIONAL

FOOTBALL LEAGUE

Opinion of the Court

power characteristic of independent action. Each of the

teams is a substantial, independently owned, and inde­

pendently managed business. “[T]heir general corporate

actions are guided or determined” by “separate corporate

consciousnesses,” and “[t]heir objectives are” not “com­

mon.” Copperweld, 467 U. S., at 771; see also North

American Soccer League v. NFL, 670 F. 2d 1249, 1252

(CA2 1982) (discussing ways that “the financial perform­

ance of each team, while related to that of the others, does

not . . . necessarily rise and fall with that of the others”).

The teams compete with one another, not only on the

playing field, but to attract fans, for gate receipts and for

contracts with managerial and playing personnel. See

Brown v. Pro Football, Inc., 518 U. S. 231, 249 (1996);

Sullivan v. NFL, 34 F. 3d 1091, 1098 (CA1 1994); Mid-

South Grizzlies v. NFL, 720 F. 2d 772, 787 (CA3 1983); cf.

NCAA, 468 U. S., at 99.

Directly relevant to this case, the teams compete in the

market for intellectual property. To a firm making hats,

the Saints and the Colts are two potentially competing

suppliers of valuable trademarks. When each NFL team

licenses its intellectual property, it is not pursuing the

“common interests of the whole” league but is instead

pursuing interests of each “corporation itself,” Copperweld,

467 U. S., at 770; teams are acting as “separate economic

actors pursuing separate economic interests,” and each

team therefore is a potential “independent cente[r] of

decisionmaking,” id., at 769. Decisions by NFL teams to

license their separately owned trademarks collectively and

to only one vendor are decisions that “depriv[e] the mar­

ketplace of independent centers of decisionmaking,” ibid.,

and therefore of actual or potential competition. See

NCAA, 468 U. S., at 109, n. 39 (observing a possible §1

violation if two separately owned companies sold their

separate products through a “single selling agent”); cf.

Areeda & Hovenkamp ¶1478a, at 318 (“Obviously, the

Cite as: 560 U. S. ____ (2010) 13

Opinion of the Court

most significant competitive threats arise when joint

venture participants are actual or potential competitors”).

In defense, respondents argue that by forming NFLP,

they have formed a single entity, akin to a merger, and

market their NFL brands through a single outlet. But it is

not dispositive that the teams have organized and own a

legally separate entity that centralizes the management of

their intellectual property. An ongoing §1 violation cannot

evade §1 scrutiny simply by giving the ongoing violation a

name and label. “Perhaps every agreement and combina­

tion in restraint of trade could be so labeled.” Timken

Roller Bearing Co. v. United States, 341 U. S. 593, 598

(1951).

The NFL respondents may be similar in some sense to a

single enterprise that owns several pieces of intellectual

property and licenses them jointly, but they are not simi­

lar in the relevant functional sense. Although NFL teams

have common interests such as promoting the NFL brand,

they are still separate, profit-maximizing entities, and

their interests in licensing team trademarks are not nec­

essarily aligned. See generally Hovenkamp, Exclusive

Joint Ventures and Antitrust Policy, 1995 Colum. Bus.

L. Rev. 1, 52–61 (1995); Shishido, Conflicts of Interest and

Fiduciary Duties in the Operation of a Joint Venture, 39

Hastings L. J. 63, 69–81 (1987). Common interests in the

NFL brand “partially unit[e] the economic interests of the

parent firms,” Broadley, Joint Ventures and Antitrust

Policy, 95 Harv. L. Rev. 1521, 1526 (1982) (emphasis

added), but the teams still have distinct, potentially com­

peting interests.

It may be, as respondents argue, that NFLP “has served

as the ‘single driver’’ of the teams’ “promotional vehicle,”

“ ‘pursu[ing] the common interests of the whole.’ ” Brief for

NFL Respondents 28 (quoting Copperweld, 467 U. S., at

770–771; brackets in original). But illegal restraints often

are in the common interests of the parties to the restraint,

14 AMERICAN NEEDLE, INC. v. NATIONAL

FOOTBALL LEAGUE

Opinion of the Court

at the expense of those who are not parties. It is true, as

respondents describe, that they have for some time mar­

keted their trademarks jointly. But a history of concerted

activity does not immunize conduct from §1 scrutiny.

“Absence of actual competition may simply be a manifes­

tation of the anticompetitive agreement itself.” Freeman,

322 F. 3d, at 1149.

Respondents argue that nonetheless, as the Court of

Appeals held, they constitute a single entity because

without their cooperation, there would be no NFL football.

It is true that “the clubs that make up a professional

sports league are not completely independent economic

competitors, as they depend upon a degree of cooperation

for economic survival.” Brown, 518 U. S., at 248. But the

Court of Appeals’ reasoning is unpersuasive.

The justification for cooperation is not relevant to

whether that cooperation is concerted or independent

action.6 A “contract, combination . . . or conspiracy,” §1,

that is necessary or useful to a joint venture is still a

“contract, combination . . . or conspiracy” if it “deprives the

marketplace of independent centers of decisionmaking,”

Copperweld, 467 U. S., at 769. See NCAA, 468 U. S., at

113 (“[J]oint ventures have no immunity from antitrust

laws”). Any joint venture involves multiple sources of

economic power cooperating to produce a product. And for

many such ventures, the participation of others is neces­

sary. But that does not mean that necessity of cooperation

transforms concerted action into independent action; a nut

and a bolt can only operate together, but an agreement

between nut and bolt manufacturers is still subject to §1

——————

6 As discussed infra, necessity of cooperation is a factor relevant to

whether the agreement is subject to the Rule of Reason. See NCAA,

468 U. S., at 101 (holding that NCAA restrictions on televising college

football games are subject to Rule of Reason analysis for the “critical”

reason that “horizontal restraints on competition are essential if the

product is to be available at all”).

Cite as: 560 U. S. ____ (2010) 15

Opinion of the Court

analysis. Nor does it mean that once a group of firms

agree to produce a joint product, cooperation amongst

those firms must be treated as independent conduct. The

mere fact that the teams operate jointly in some sense

does not mean that they are immune.7

The question whether NFLP decisions can constitute

concerted activity covered by §1 is closer than whether

decisions made directly by the 32 teams are covered by §1.

This is so both because NFLP is a separate corporation

with its own management and because the record indi­

cates that most of the revenues generated by NFLP are

shared by the teams on an equal basis. Nevertheless we

think it clear that for the same reasons the 32 teams’

conduct is covered by §1, NFLP’s actions also are subject

to §1, at least with regards to its marketing of property

owned by the separate teams. NFLP’s licensing decisions

are made by the 32 potential competitors, and each of

them actually owns its share of the jointly managed as­

sets. Cf. Sealy, 388 U. S., at 352–354. Apart from their

agreement to cooperate in exploiting those assets, includ­

ing their decisions as the NFLP, there would be nothing to

prevent each of the teams from making its own market

——————

7 In any event, it simply is not apparent that the alleged conduct was

necessary at all. Although two teams are needed to play a football

game, not all aspects of elaborate interleague cooperation are necessary

to produce a game. Moreover, even if leaguewide agreements are

necessary to produce football, it does not follow that concerted activity

in marketing intellectual property is necessary to produce football.

The Court of Appeals carved out a zone of antitrust immunity for

conduct arguably related to league operations by reasoning that coordi­

nated team trademark sales are necessary to produce “NFL football,” a

single NFL brand that competes against other forms of entertainment.

But defining the product as “NFL football” puts the cart before the

horse: Of course the NFL produces NFL football; but that does not

mean that cooperation amongst NFL teams is immune from §1 scru­

tiny. Members of any cartel could insist that their cooperation is

necessary to produce the “cartel product” and compete with other

products.

16 AMERICAN NEEDLE, INC. v. NATIONAL

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Opinion of the Court

decisions relating to purchases of apparel and headwear,

to the sale of such items, and to the granting of licenses to

use its trademarks.

We generally treat agreements within a single firm as

independent action on the presumption that the compo­

nents of the firm will act to maximize the firm’s profits.

But in rare cases, that presumption does not hold. Agree­

ments made within a firm can constitute concerted action

covered by §1 when the parties to the agreement act on

interests separate from those of the firm itself,8 and the

intrafirm agreements may simply be a formalistic shell for

ongoing concerted action. See, e.g., Topco Associates, Inc.,

405 U. S., at 609; Sealy, 388 U. S., at 352–354.

For that reason, decisions by the NFLP regarding the

teams’ separately owned intellectual property constitute

concerted action. Thirty-two teams operating independ­

ently through the vehicle of the NFLP are not like the

components of a single firm that act to maximize the firm’s

profits. The teams remain separately controlled, potential

competitors with economic interests that are distinct from

NFLP’s financial well-being. See generally Hovenkamp,

1995 Colum. Bus. L. Rev., at 52–61. Unlike typical deci­

sions by corporate shareholders, NFLP licensing decisions

effectively require the assent of more than a mere majority

of shareholders. And each team’s decision reflects not only

an interest in NFLP’s profits but also an interest in the

team’s individual profits. See generally Shusido, 39 Hast­

ings L. J., at 69–71. The 32 teams capture individual

——————

8 See Areeda & Hovenkamp ¶1471; Elhauge & Geradin 786–787, and

n. 6; see also Capital Imaging Assoc. v. Mohawk Valley Medical Assoc.,

Inc., 996 F. 2d 537, 544 (CA2 1993); Bolt v. Halifax Hospital Medical

Center, 891 F. 2d 810, 819 (CA11 1990); Oksanen v. Page Memorial

Hospital, 945 F. 2d 696, 706 (CA4 1991); Motive Parts Warehouse v.

Facet Enterprises, 774 F. 2d 380, 387–388 (CA10 1985); Victorian

House, Inc. v. Fisher Camuto Corp., 769 F. 2d 466, 469 (CA8 1985);

Weiss v. York Hospital, 745 F. 2d 786, 828 (CA3 1984).

Cite as: 560 U. S. ____ (2010) 17

Opinion of the Court

economic benefits separate and apart from NFLP profits

as a result of the decisions they make for the NFLP.

NFLP’s decisions thus affect each team’s profits from

licensing its own intellectual property. “Although the

business interests of” the teams “will often coincide with

those of the” NFLP “as an entity in itself, that commonal­

ity of interest exists in every cartel.” Los Angeles Memo

rial Coliseum Comm’n v. NFL, 726 F. 2d 1381, 1389 (CA9

1984) (emphasis added). In making the relevant licensing

decisions, NFLP is therefore “an instrumentality” of the

teams. Sealy, 388 U. S., at 352–354; see also Topco Asso

ciates, Inc., 405 U. S., at 609.

If the fact that potential competitors shared in profits or

losses from a venture meant that the venture was immune

from §1, then any cartel “could evade the antitrust law

simply by creating a ‘joint venture’ to serve as the exclu­

sive seller of their competing products.” Major League

Baseball Properties, Inc. v. Salvino, Inc., 542 F. 3d 290,

335 (CA2 2008) (Sotomayor, J., concurring in judgment).

“So long as no agreement,” other than one made by the

cartelists sitting on the board of the joint venture, “explic­

itly listed the prices to be charged, the companies could act

as monopolies through the ‘joint venture.’ ” Ibid. (Indeed,

a joint venture with a single management structure is

generally a better way to operate a cartel because it de­

creases the risks of a party to an illegal agreement defect­

ing from that agreement). However, competitors “cannot

simply get around” antitrust liability by acting “through a

third-party intermediary or ‘joint venture’.” Id., at 336.9

——————

9 For the purposes of resolving this case, there is no need to pass upon

the Government’s position that entities are incapable of conspiring

under §1 if they “have effectively merged the relevant aspect of their

operations, thereby eliminating actual and potential competition . . . in

that operational sphere” and “the challenged restraint [does] not

significantly affect actual or potential competition . . . outside their

merged operations.” Brief for United States as Amicus Curiae 17. The

18 AMERICAN NEEDLE, INC. v. NATIONAL

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Opinion of the Court

VI

Football teams that need to cooperate are not trapped

by antitrust law. “[T]he special characteristics of this

industry may provide a justification” for many kinds of

agreements. Brown, 518 U. S., at 252 (STEVENS, J., dis­

senting). 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 §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.10 NCAA, 468

——————

Government urges that the choices “to offer only a blanket license” and

“to have only a single headwear licensee” might not constitute con­

certed action under its test. Id., at 32. However, because the teams

still own their own trademarks and are free to market those trade­

marks as they see fit, even those two choices were agreements amongst

potential competitors and would constitute concerted action under the

Government’s own standard. At any point, the teams could decide to

license their own trademarks. It is significant, moreover, that the

teams here control NFLP. The two choices that the Government might

treat as independent action, although nominally made by NFLP, are for

all functional purposes choices made by the 32 entities with potentially

competing interests.

10 Justice Brandeis provided the classic formulation of the Rule of

Reason in Board of Trade of Chicago v. United States, 246 U. S. 231,

238 (1918):

“The true test of legality is whether the restraint imposed is such as

merely regulates and perhaps thereby promotes competition or whether

it is such as may suppress or even destroy competition. To determine

that question the court must ordinarily consider the facts peculiar to

the business to which the restraint is applied; its condition before and

after the restraint is imposed; the nature of the restraint and its effect,

actual or probable. The history of the restraint, the evil believed to

exist, the reason for adopting the particular remedy, the purpose or end

Cite as: 560 U. S. ____ (2010) 19

Opinion of the Court

U. S., at 101; see id., at 117 (“Our decision not to apply a

per se rule to this case rests in large part on our recogni­

tion that a certain degree of cooperation is necessary if the

type of competition that petitioner and its member institu­

tions seek to market is to be preserved”); see also Dagher,

547 U. S., at 6. In such instances, the agreement is likely

to survive the Rule of Reason. See Broadcast Music, Inc.

v. Columbia Broadcasting System, Inc., 441 U. S. 1, 23

(1979) (“Joint ventures and other cooperative arrange­

ments are also not usually unlawful. . . where the agree­

ment . . . is necessary to market the product at all”). And

depending upon the concerted activity in question, the

Rule of Reason may not require a detailed analysis; it “can

sometimes be applied in the twinkling of an eye.” NCAA,

468 U. S., at 109, n. 39.

Other features of the NFL may also save agreements

amongst the teams. We have recognized, for example,

“that the interest in maintaining a competitive balance”

among “athletic teams is legitimate and important,”

NCAA, 468 U. S., at 117. While that same interest applies

to the teams in the NFL, it does not justify treating them

as a single entity for §1 purposes when it comes to the

marketing of the teams’ individually owned intellectual

property. It is, however, unquestionably an interest that

may well justify a variety of collective decisions made by

the teams. What role it properly plays in applying the

Rule of Reason to the allegations in this case is a matter to

be considered on remand.

——————

sought to be attained, are all relevant facts. This is not because a good

intention will save an otherwise objectionable regulation or the reverse;

but because knowledge of intent may help the court to interpret facts

and to predict consequences.” See also Leegin Creative Leather Prod

ucts, Inc. v. PSKS, Inc., 551 U. S. 877, 885–887 (2007); National Soc. of

Professional Engineers, 435 U. S., at 688–691.

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Opinion of the Court

* * *

Accordingly, the judgment of the Court of Appeals is

reversed, and the case is remanded for further proceedings

consistent with this opinion.

It is so ordered.