Sherman Act: Common Issues and Recurring Subject Areas
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CHAPTER IV
SHERMAN ACT: COMMON ISSUES AND
RECURRING SUBJECT AREAS
A. Introduction
Having described the elements and analytical framework of Sherman
Act cases involving sports, this chapter now looks at how these elements
and principles have been applied by the courts. First, we discuss how the
common inquiry into market definition and market power have played
out in the courts, especially as market power thresholds have gained in
importance over the past few decades.
Second, we examine how courts have addressed particular categories
of alleged restraints (Section 1 cases) or unilateral conduct (Section 2
cases). And, more specifically, we review how courts have grappled with
the requirement of injury to competition or market-wide harm in
assessing these recurring challenges. (Private litigation issues such as
antitrust injury and standing are taken up in Chapter V).
B. Common Issues Under Section 1 and Section 2: Market
Definition and Extent of Market Power
Defining a relevant market is a critical part of many antitrust cases.
In most claims brought under Sections 1 and 2 of the Sherman Act, a
plaintiff must adequately allege that the anticompetitive conduct at issue
creates adverse anticompetitive effects within a relevant market.
1
In a
general sense, the objective of defining the relevant market is to draw a
line between those products and services that substantially compete with
each other and those that do not, in order to determine whether alleged
misconduct impacts competition.
2
1
. See, e.g., Ma dison Square Garden, L.P. v. Nat’l Hockey League, No. 07
CV 8455(LAP), 2007 WL 3254421 (S.D.N.Y. Nov. 2, 2007) (denying
motion for preliminary injunction a nd noting that failure to allege a
relevant market generally will be fatal to an antitrust claim), aff’d, 270 F.
App’x 56 (2d Cir. 2008).
2
. 1 ABA SECTION OF ANTITRUST LAW, ANTITRUST LAW DEVELOPMENTS
549 (7th ed. 2012).
48 Sports and Antitrust Law
It is not necessary to define a relevant market for per se violations of
the antitrust laws nor for naked restraints on competition, which trigger
quick look review.
3
Per se violations (e.g., price-fixing, market
allocation, etc.) are illegal, irrespective of market definition. Similarly,
under the “quick look” doctrine, precise definitions of the relevant
market or anticompetitive effects may be relaxed if “an observer with
even a rudimentary understanding of economics could conclude that the
arrangements in question would have an anticompetitive effect on
customers and markets.”
4
Notably, however, many antitrust challenges involving sports
leagues—which are viewed as legitimate joint ventures—are adjudicated
under a full rule of reason analysis,
5
where market definition can be a
dispositive threshold inquiry. Under the full rule of reason, a Section 1
plaintiff must first show that an alleged restraint results in significant
anticompetitive effects within a relevant product and geographic market.
6
Once this threshold requirement is met, the burden then shifts to the
defendant, who must present evidence of the restraint’s procompetitive
justifications.
7
If the defendant succeeds in showing a restraint’s
procompetitive justifications, the burden then shifts back to plaintiff,
who must demonstrate that “any legitimate objectives can be achieved in
a substantially less restrictive manner.”
8
Further, even if plaintiff comes
forward with such proof, the ultimate balancing exercise under the rule
of reason is performed by a jury.
9
3
. See supra, Chapter II, Sections B-3-a a nd B-3-b.
4
(1999); see also Major League Basebal Props., Inc. v. Salvino, Inc., 542
F.3d 290, 317 (2d Cir. 2008).
5
. See, e.g., Toscano v. PGA Tour, Inc., 201 F. Supp. 2d 110 6, 1121-22
(E.D. Cal. 2002) (reviewing cases discussing standard of review applied
in Section 1 challenges to sports league rules); Chicago Prof’l Sports Ltd.
P’ship v. Nat’l Basketball Ass’n, 961 F.2d 667, 673 (7th Cir. 1992) (“If
the NBA is a joint venture, then the Rule of Reason supplies t he
framework for antitrust analysis, as the district court properly held.”).
6
. See Nat’l Hockey League Players’ Ass’n v. Plymouth W halers Hockey
Club, 325 F.3d 712, 718 (6th Cir. 2003) (NHLPA I).
7
. Id.
8
. Id.
9
. United States v. Brown Univ., 5 F.3d 658, 679 (3d Cir. 1993) (noting that
the plaintiff “must prove that a reasonable less restrictive alternative
exists”).
Sherman Act: Common Issues and Recurring Subject Areas 49
Similarly, monopolization claims under Section 2 of the Sherman
Act also require a threshold showing of actual or probable monopoly
power in a well-defined antitrust market.
10
1. Market Definition
a. Analytical Framework
Courts have defined “relevant market” to “encompass[] notions of
geography as well as product use, quality, and description.”
11
A relevant
product market identifies the products or services that compete with each
other, which includes those “that enjoy reasonable interchangeability of
use and cross-elasticity of demand.”
12
A relevant geographic market
represents “the ‘area of effective competition’ where buyers can turn for
alternative sources of supply.”
13
As discussed below, sports antitrust cases historically have focused
on issues related to product market definition, rather than on geographic
market definition. This focus reflects the fact that the major North
American sports leagues traditionally have competed in the United States
and Canada, with minimal competition from either (1) rival domestic
leagues or (2) international leagues. With the increasing globalization of
North American professional sports, however, the geographic element of
market definition may play a more prominent role in sports antitrust
cases in the future.
b. Product Market
As applied to the sports industry, relevant product market definition
principles present several distinct issues. First, tailoring the relevant
product market analysis to the sports industry is notoriously difficult
because there both may be significant intrabra nd competition between
teams in a particular sports league and significant inter-brand
competition between different sports leagues and other entertainment
10
11
. Tanaka v. Univ. of S. Cal., 252 F.3d 1059, 1063 (9th Cir. 2001); see a lso
United States v. E.I. du Pont de Nemours & Co., 351 U.S. 377, 380
(1956) (discussing standards for product and geographic market
analysis.).
12
. Tanaka, 252 F.3d at 1063.
13
. Id.
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