Photo by Rich Graessle/Icon Sportswire via Getty Images
A jury in Los Angeles could reshape how NFL games are broadcast
On Thursday opening arguments are scheduled to begin in In re: National Football League Sunday Ticket Antitrust Litigation, a class action lawsuit currently pending in the United States District Court for the Central District of California. The class action case alleges that the Defendants (the NFL and its member teams) as well as the league’s broadcast partners, and DirecTV engaged in a conspiracy to violate Articles 1 and 2 of the Sherman Act, which governs United States antitrust law.
As you can probably tell, this is not your usual sports blog article.
However, given what is being alleged, and how this case could potentially impact NFL media rights, we thought it was worth taking some time to outline the merits of the case, its procedural history, what could happen next, and how it might impact NFL coverage in the future.
What is being alleged
In a nutshell, the Plaintiffs are alleging that the Defendants — again the NFL and its member teams — as well as the league’s broadcast partners and DirecTV engaged in a conspiracy regarding the NFL Sunday Ticket product, where out-of-market fans were forced to pay substantial sums of money to watch their favorite teams in action.
Specifically the Plaintiffs allege three components of this conspiracy. First, that the teams have agreed not to compete with each other when it comes to producing telecasts of their games, instead conveying those rights to the league, and giving the NFL “exclusive” rights to enter into broadcast agreements.
Next, the Plaintiffs allege that the NFL has entered into agreements with broadcast partners — specifically CBS and FOX — to create a “single telecast” for every Sunday afternoon NFL game. Under the agreement, according to Plaintiffs’ theory of the case, those networks are given the “exclusive” right to broadcast a limited number of games free and “over-the-air.”
The third pillar of the conspiracy, according to Plaintiffs’, is that the league then exclusively (there is that word again) licenses to DirecTV the copyrights of those telecasts, which DirecTV then bundles into NFL Sunday Ticket. This means that out-of-market fans who want to watch their favorite teams play are forced into buying the “premium offering” of NFL Sunday Ticket.
The result, according to Plaintiffs? DirecTV was able to “charge supercompetitive prices for Sunday Ticket because fans unwilling to pay for Sunday Ticket cannot, for example, purchase out-of-market games individually or by team.” Plaintiffs assert that absent this agreement — or “conspiracy” as they term it — fans would be able to access all NFL games at “lower prices.”
Plaintiffs’ brought this class action suit alleging violations of Sections 1 and 2 of the Sherman Act, seeking billions of dollars in damages. The Sherman Act is a Federal law which governs antitrust law in the United States.
So we should go there next.
What in the world is the Sherman Act?
Again, this is not your typical sports blog, and if you want to skip to the end right now to avoid a dry discussion of antitrust law, please feel free.
Originally passed in 1890, the Sherman Antitrust Act broadly seeks to prevent anticompetitive agreements, and unilateral conduct that creates monopolies, or tries to monopolize a relevant commercial market. As the United States Supreme Court set forth in Spectrum Sports, Inc. v. McQuillan (a case involving a substance used in athletic goods), the Sherman Act aims “ … to protect the public from the failure of the market. The law directs itself not against conduct which is competitive, even severely so, but against conduct which unfairly tends to destroy competition itself.”
Returning to the matter at hand, Plaintiffs are alleging that the DirecTV Sunday Ticket structure violated both Section 1 and Section 2 of the Sherman Act. Section 1 prohibits “[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States,” While that seems broad, subsequent Supreme Court precedent since the implementation of the Sherman Act has outlined that the law is aimed at “outlawing only unreasonable restraints” of trade and commerce. State Oil Co. v. Khan.
To prove a violation under Section 1 of the Sherman Act, plaintiffs must prove four elements:
A contract, combination, or conspiracy among two or more persons or distinct business entities;
The agreement “unreasonably restrained trade under the rule of reason”;
The restraint impacted interstate commerce, and;
The plaintiffs have “standing.” (More on this point in a moment).
While Section 1 involves only “concerted action that restraints trade,” as set forth in Am. Needle, Inc. vs. National Football League — a case involving NFL team logos — Section 2 is a bit more broad, which covers both “concerted and independent action.” Under Section 2 of the Sherman Act, a person or business cannot “monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations.”
Plaintiffs allege two violations of this section. First, that there was a conspiracy to monopolize, and second, that there was a monopoly created by the Defendants and their broadcast partners.
To be successful on the first portion of the claim, the conspiracy portion, the Plaintiffs must prove four elements:
A combination or conspiracy to monopolize;
An “overt act” in furtherance of the conspiracy;
An “intent” to monopolize, and;
Antitrust injury.
Regarding the creation of a monopoly itself, the Plaintiffs in this case must prove that the Defendants: Had monopoly power in the marketplace, willfully acquired that power, and a subsequent injury to the Plaintiffs.
As alleged by the Plaintiffs’ in their Complaint, they have satisfied all of these elements in both their allegations regarding Section 1, and Section 2. With respect to Section 1, Plaintiffs allege in their Complaint that the Defendants “entered into an unlawful agreement, combination, and conspiracy in restraint of trade, in violation of” Section 1. “Specifically, Defendants agreed to restrain competition in the licensing and distribution of live video presentations of NFL games … with the purpose, intent, and effect of restraining trade and commerce and increasing prices paid by consumers and advertisers to distributors of live video presentations of regular season NFL games.”
When it comes to Section 2, the Defendants “ … agreed to consolidate all licensing rights for live video presentations of regular season NFL games into a single entity, with the purpose, intent, and effect of monopolizing the relevant market … “
Who are the Plaintiffs?
So next question to address.
Who, exactly, are the Plaintiffs?
Class action lawsuits involve “representative” plaintiffs, who stand in the litigation as representatives of the entire group of plaintiffs.
Generally speaking, the United States District Court for the Central District of California has identified two different classes of Plaintiffs in this case: A “Damages” class, and an “Injunctive” class. The Damages classes of Plaintiffs include two subsections: A “Residential Damages Class” that includes all DirecTV “ … residential subscribers that purchased the NFL Sunday Ticket at any time between June 17, 2011 and February 7, 2023,” and a “Commercial Damages Class” that includes all DirecTV “ commercial subscribers that purchased the NFL Sunday Ticket at any time between June 17, 2011 and February 7, 2023.”
The “Injunctive Classes” also include a “Residential Injunctive Class” and a “Commercial Injunctive Class,” with the same timelines as outlined above.
In the Complaint, four specific representative Plaintiffs are identified:
The Mucky Duck, a pub in San Francisco that purchased the Sunday Ticket package “in order to attract patrons to its establishment on Sunday afternoons during the NFL’s professional football season.”
The Gael Pub, a pub in New York City that also purchased Sunday Ticket to attract patrons.
Robert Gary Lippincott Jr., a resident of Healdsburg, California, who bought Sunday Ticket to watch out-of-market games.
Jonathan Frantz, a resident of Oakland, California, who bought Sunday Ticket to watch out-of-market games.
What are the Defendants — including the NFL — saying in response?
Before we dive into what the Defendants are alleging, we should talk about the “procedural history” of the case for a moment. Specifically, a look at when the case began and what happened in the years leading to this moment.
The lawsuit was initially filed back in 2015, on behalf of the Mucky Duck pub identified above. After two years of initial litigation, a Federal judge in Los Angeles dismissed the case, siding with an argument advanced by the Defendants that the DirecTV subscribers had not made a case that the exclusive distribution deal violated the Sherman Act.
Plaintiffs appealed that decision, and in 2019 the Ninth Circuit Court of Appeals reinstated the litigation.
Defendants appealed that ruling to the United States Supreme Court, which ruled in November of 2020 that the case could move forward, declining to review the Ninth Circuit’s decision.
In Feburary of 2023, the United States District Court for the Central District of California certified the litigation as a class action lawsuit, and then in January of this year U.S. District Court Judge Philip S. Gutierrez denied another Motion for Summary Judgement filed by the Defendants, noting at the end of a 30-page Opinion reviewed by SB Nation that “ … the following causes of action remain for trial: Violation of [Section 1] of the Sherman Act, and violation of [Section 2] of the Sherman Act.”
In that Opinion, Judge Gutierrez walked through the four pillars raised by the Defendants when seeking summary judgement. First, the Defendants argued that the Plaintiffs lack “standing” to seek damages, alleging that the Plaintiffs purchased “nothing” from the NFL and cannot “prove” a conspiracy. Second, the Defendants argued that the “Sports Broadcasting Act” (SBA) prevents Plaintiffs from bringing a claim, since the Plaintiffs are also challenging agreements between the NFL and CBS and FOX, and the SBA bars those claims.
Third, the Defendants argued that the Plaintiffs cannot prove that Defendants “took concerted action nor that the concerted action unreasonably restrained trade.” Finally, the Defendants alleged that once those three arguments fail, all that is left for the Plaintiffs to challenge is the direct agreement between the NFL and DirecTV. That agreement standing alone, Defendants argued, was not enough to show a violation of the relevant Sherman Act sections.
Judge Gutierrez, in the lengthy 30-page opinion, dismissed those arguments.
What could happen next?
As things stand at the moment, a Jury Trial is underway in front of Judge Gutierrez in Courtroom 6A of the United States District Court for the Central District of California. The trial is set for 13 days.
As for what to expect?
Who knows. But you might want to prepare for some kind of settlement in the coming days.
The adversarial system of civil litigation creates an incentive for the parties to reach some sort of agreement ahead of trial. As my own legal skills advisor drilled into my brain the first month of law school, “[I]f a case reaches trial, somebody screwed up.”
Simply put, trials involve risk. Especially jury trials. Any lawyer who has spent time in front of a jury knows full well that jurors can sometimes latch onto different — and sometimes unexpected — arguments over the course of a trial. I could bore you (even more at this point) with stories from my own days trying cases in front of a jury, but when you put a case in the hands of jurors, anything can happen.
They could throw the whole case out and side entirely with the Defendants, or they could find that the NFL did everything that is alleged, awarding millions — or even billions — of dollars in damages.
Thus, the risk for both sides. The Plaintiffs are at risk of losing this case after years of incurring litigations costs. The Defendants are at risk of being hit with a massive monetary damages award, and potentially a new system of NFL media rights where fans can purchase individual games or team specific packages. A loss in this litigation could also mean that the league is forced to allow for multiple Sunday Ticket packages, creating competition and driving down prices.
And taking money out of their coffers going forward.
Then there is the NFL’s history of dealing with litigation. In a case such as this, with the member teams as defendants, there is a risk that owners such as Jerry Jones could be called to the stand. This is the kind of development the league has sought to avoid in the past. For example, back in 2021 the league settled a lawsuit involving the relocation of the St. Louis Rams for a staggering $790 million, a few months before trial.
Settlements allow for some risk management, and often come with confidentiality agreements, that keep things out of the public eye.
So if you have visions of Jerry Jones or another NFL owner sitting on the stand and screaming “YOU CAN’T HANDLE THE TRUTH” a la Jack Nicholson in A Few Good Men, prepare to be disappointed. Because as fascinating as that would be, expect some resolution of this matter before the trial gets to that point.
