Sherman Act Claims: Elements and Analytical Framework

• Pages: 31-46

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CHAPTER III

SHERMAN ACT CLAIMS: ELEMENTS AND

ANALYTICAL FRAMEWORK

A.Introduction

This chapter presents the basic Sherman Act elements (both for

Section 1 and Section 2 claims) as well as some of the recurring issues in

sports antitrust cases, many of which can be outcome-determinative.

One of those issues is whether, under Section 1 of the Sherman Act,

the defendants have the capacity to conspire—i.e., they are separate

economic actors in the marketplace for Section 1 purposes. Another

threshold issue for the court ina Section 1 case—although not always at

the motion to dismiss stage—isto determine what analytical framework

to apply. If, for example, the plaintiff is proceeding on a per se or “quick

look” theory, then the case will be dismissed if the court determines the

full rule of reason applies. Further, in the wake of Dagher

1

and American

Needle,

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there is significant uncertainty about what canbe viewed as

procompetitive as a matter of law, even at the motion todismiss stage.

And, of course, in Section 2 cases, courts must assess the defendant’s

alleged monopoly power and alleged misconduct. These analytical

frameworks are discussed below.

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B.Section 1: Elements, Threshold Issues, and Modes of Analysis

1.Section 1 Elements

Section 1 of the Sherman Act provides that “[e]very contract,

combination in the form of a trust or otherwise, or conspiracy, in restraint

of trade or commerce . . . isdeclared tobe illegal.”

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Itis well settled that

only “unreasonable” restraints of trade are prohibited by the statute.

Thus, at its simplest level, a Section 1 violation requires plaintiff to

establish (1) a contract, combination orconspiracy among two or more

1

. Texaco Inc. v. Dagher, 547 U.S. 1 (2006).

2

. Am. Needle, Inc. v. Nat’l Football League, 560 U.S. 183 (2010).

3

. The application of these princip les to specific recurring fact patterns is

addressed in Chapter III.

4

. 15 U.S.C. § 1.

32 Sports and Antitrust Law

distinct business entities, (2) that unreasonably restrains trade, and (3)

causes plaintiff an antitrust injury.

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Inorder to understand how these elements are applied in the sports

industry, itisuseful first tosummarize certain threshold and analytical

issues, namely: the scope and application ofthe single-entity doctrine;

the analytical framework that courts may apply to any particular alleged

restraint; and, where appropriate, the current analytical steps and burden

shifting that has become part of the full rule of reason.

2.Single Entity Doctrine

a.Origins

Section 1 of the Sherman Act applies to“contracts, combinations,

and conspiracies”—generally described as“agreements”—in restraint of

trade.

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The so-called “single entity” doctrine assesses whether two

entities are sufficiently economically independent tobe viewed as

independent entities capable of conspiring with one another for purposes

of Section 1. By contrast, a “single entity”isincapable of conspiring

with itself and therefore not subject to Section 1 scrutiny.

Historically, the leading case on this doctrine isCopperweld Corp. v.

Independence Tube Corp.,

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which holds that a parent corporation and its

wholly owned subsidiary are a “single entity” for antitrust purposes.

8

In

the sports context, a district court applied single entity treatment to a

Professional Golfers’ Association of America (PGA) rule imposed on the

Middle Atlantic Section of the PGA (MAPGA).

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The plaintiff entered

into a contract to promote a golf trade show under the MAPGA’s

sponsorship. When the promoters proposed the trade show be moved to a

location just outside the MAPGA’s district, the PGA blocked the show

because the proposed location was in another PGA section’s territory.

The trade show organizers challenged the restriction, but the district

court rejected the Section 1 claims after concluding the PGA and the

MAPGA were operating as a single entity. The Fourth Circuit affirmed,

5

. See, e.g., Dagher, 547 U.S. at 5; Major League Baseball Props., Inc. v.

Salvino, Inc., 542 F.3d 290, 315 (2d Cir. 2008).

6

. 15 U.S.C § 1.

7

. 467 U.S. 752 (1984).

8

. Id. at 771.

9

. Seabury Mgmt. v. Prof’l Golfers’ Ass’n of Am., No. 94-1688, 1995 U.S.

App. LEXIS 9538 (4th Cir. Apr. 26, 1995) (d ecision referenced in table at

52 F.3d 322).