|August 8, 2013|
Previously published on August 7, 2013
On August 2, 2013, District Judge Edward J. Davila denied a motion to dismiss antitrust claims brought by consumers of NFL apparel against Reebok and the NFL in Dang v. San Francisco Forty Niners, Case No. 5:12-CV-5481 (N.D. Cal.). Plaintiff seeks to represent a class of NFL apparel purchasers who were allegedly overcharged as a result of an agreement that gave Reebok the exclusive right to make and sell NFL apparel. Defendants -- Rebook, the NFL, the NFL teams, and an NFL licensing entity -- argued that plaintiff lacked standing and failed to adequately plead a relevant market. Judge Davila denied defendants’ motion to dismiss. The Court held that NFL apparel and NFL apparel licenses could be relevant markets because the NFL logos may be what consumers really want, in which case non-NFL apparel would not be a reasonable substitute. The Court also held that Dang had sufficiently pleaded standing in both markets, because he was present and injured in the retail market, and his injury was inextricably intertwined with the licensing market. The decision has potentially broad implications for similar licensing agreements throughout the professional and collegiate sports world, at least at the pleading stage.
Plaintiff Patrick Dang alleged that Reebok’s exclusive licensing agreement caused Dang to pay an anticompetitive overcharge on purchases of apparel bearing NFL team logs and other NFL intellectual property. Dang alleged that the agreement violated Sherman Act Section 1 and sought injunctive relief on behalf of a nationwide class of indirect purchasers. Dang also alleged that the agreement violated California’s Cartwright Act and Unfair Competition Law, and sought to represent a class of California indirect purchasers.
In their motion to dismiss, defendants argued that Dang’s alleged relevant markets for NFL apparel and NFL apparel licenses were too narrow because a relevant market cannot be based on a single brand or trademark. The Court disagreed, holding that the alleged market consisted of all 30 NFL teams’ logos, and all of those teams competed with each other for apparel sales throughout the country. In addition, unlike trademarks that only serve to identify origin, NFL team logos “may very well be the products themselves that consumers seek to purchase.” Furthermore, the Court found that non-NFL apparel, such as baseball, collegiate, entertainment or fashion apparel “would not suffice as a reasonable substitute” for NFL apparel.
Defendants also argued that plaintiff lacked standing under Associated General Contractors of Cal., Inc. v. Cal. State Council of Carpenters (“AGC”), 459 U.S. 519 (1983) because he was not a participant in the market where competition was allegedly restrained; Dang was a retail consumer of NFL apparel, but the alleged restraint occurred in the upstream market for NFL apparel licenses. The Court disagreed. As to the retail NFL apparel market, Dang’s allegations were sufficient to establish standing under AGC because he “clearly states that he participated in this market and suffered an injury in the form of an ‘anticompetitive overcharge.’” As to the NFL apparel license market, Dang’s alleged injury in the retail market was “inextricably intertwined” with defendants’ alleged licensing conduct because “the relevance and value of the apparel to the consumers lie in their containing and displaying the logos and trademarks of NFL teams.” Moreover, Dang claimed that he paid an overcharge that was “directly traceable to the licensing market.”
Finally, the court rejected defendants’ argument that the complaint lacked sufficient detail regarding the nature of Dang’s purchases (type of apparel, identity of manufacturer, where it was purchased). The Court held that the complaint had sufficiently alleged an exclusive licensing agreement that would affect all NFL apparel purchases.
The decision could open the floodgates for plaintiffs to file similar cases challenging exclusive licensing deals involving other professional or collegiate sports organizations. Indeed, even other kinds of exclusive licensing agreements may be targeted where the licensed intellectual property can be alleged to be what consumers really want. Whether Dang can actually establish his allegations remains to be seen. Consumers looking for jackets with NFL team logos might find non-branded jackets to be reasonable substitutes if they are lower priced.