[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]



 
                       ANTITRUST IMPLICATIONS OF 
                         AMERICAN NEEDLE v. NFL
=======================================================================

                                HEARING

                               BEFORE THE

                       SUBCOMMITTEE ON COURTS AND
                           COMPETITION POLICY

                                 OF THE

                       COMMITTEE ON THE JUDICIARY
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION
                               __________

                            JANUARY 20, 2010
                               __________

                           Serial No. 111-126
                               __________

         Printed for the use of the Committee on the Judiciary



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                 JOHN CONYERS, Jr., Michigan, Chairman
HOWARD L. BERMAN, California         LAMAR SMITH, Texas
RICK BOUCHER, Virginia               F. JAMES SENSENBRENNER, Jr., 
JERROLD NADLER, New York                 Wisconsin
ROBERT C. ``BOBBY'' SCOTT, Virginia  HOWARD COBLE, North Carolina
MELVIN L. WATT, North Carolina       ELTON GALLEGLY, California
ZOE LOFGREN, California              BOB GOODLATTE, Virginia
SHEILA JACKSON LEE, Texas            DANIEL E. LUNGREN, California
MAXINE WATERS, California            DARRELL E. ISSA, California
WILLIAM D. DELAHUNT, Massachusetts   J. RANDY FORBES, Virginia
STEVE COHEN, Tennessee               STEVE KING, Iowa
HENRY C. ``HANK'' JOHNSON, Jr.,      TRENT FRANKS, Arizona
  Georgia                            LOUIE GOHMERT, Texas
PEDRO PIERLUISI, Puerto Rico         JIM JORDAN, Ohio
MIKE QUIGLEY, Illinois               TED POE, Texas
JUDY CHU, California                 JASON CHAFFETZ, Utah
LUIS V. GUTIERREZ, Illinois          TOM ROONEY, Florida
TAMMY BALDWIN, Wisconsin             GREGG HARPER, Mississippi
CHARLES A. GONZALEZ, Texas
ANTHONY D. WEINER, New York
ADAM B. SCHIFF, California
LINDA T. SANCHEZ, California
DEBBIE WASSERMAN SCHULTZ, Florida
DANIEL MAFFEI, New York
[Vacant]

       Perry Apelbaum, Majority Staff Director and Chief Counsel
      Sean McLaughlin, Minority Chief of Staff and General Counsel
                                 ------                                

             Subcommittee on Courts and Competition Policy

           HENRY C. ``HANK'' JOHNSON, Jr., Georgia, Chairman

JOHN CONYERS, Jr., Michigan          HOWARD COBLE, North Carolina
RICK BOUCHER, Virginia               JASON CHAFFETZ, Utah
CHARLES A. GONZALEZ, Texas           F. JAMES SENSENBRENNER, Jr., 
SHEILA JACKSON LEE, Texas            Wisconsin
MELVIN L. WATT, North Carolina       BOB GOODLATTE, Virginia
MIKE QUIGLEY, Illinois               DARRELL ISSA, California
DANIEL MAFFEI, New York              GREGG HARPER, Mississippi
[Vacant]

                    Christal Sheppard, Chief Counsel

                    Blaine Merritt, Minority Counsel
                            C O N T E N T S

                              ----------                              

                            JANUARY 20, 2010

                                                                   Page

                           OPENING STATEMENTS

The Honorable Henry C. ``Hank'' Johnson, Jr., a Representative in 
  Congress from the State of Georgia, and Chairman, Subcommittee 
  on Courts and Competition Policy...............................     1
The Honorable Howard Coble, a Representative in Congress from the 
  State of North Carolina, and Ranking Member, Subcommittee on 
  Courts and Competition Policy..................................     2

                               WITNESSES

Mr. Gary Gertzog, Senior Vice President, National Football 
  League, New York, NY
  Oral Testimony.................................................     7
  Prepared Statement.............................................     9
Mr. Kevin James Mawae, President, National Football League 
  Players Association, Washington, DC
  Oral Testimony.................................................    17
  Prepared Statement.............................................    20
Mr. William L. Daly, III, Deputy Commissioner, National Hockey 
  League, New York, NY
  Oral Testimony.................................................    24
  Prepared Statement.............................................    27
Mr. Stephen F. Ross, Lewis H. Vovakis Distinguished Faculty 
  Scholar, Professor of Law and Director for Sports Law, Policy 
  and Research, Pennsylvania State University, University Park, 
  PA
  Oral Testimony.................................................    36
  Prepared Statement.............................................    38


                       ANTITRUST IMPLICATIONS OF 
                         AMERICAN NEEDLE v. NFL

                              ----------                              


                      WEDNESDAY, JANUARY 20, 2010

              House of Representatives,    
                 Subcommittee on Courts and
                                 Competition Policy
                                Committee on the Judiciary,
                                                    Washington, DC.

    The Subcommittee met, pursuant to notice, at 2:01 p.m., in 
room 2141, Rayburn House Office Building, the Honorable Henry 
C. ``Hank'' Johnson, Jr. (Chairman of the Subcommittee) 
presiding.
    Present: Representatives Johnson, Conyers, Jackson Lee, 
Watt, and Coble.
    Also present: Representatives Smith and Gohmert.
    Staff present: (Majority) Christal Sheppard, Subcommittee 
Chief Counsel; Anant Rant, Counsel; Rosalind Jackson, 
Professional Staff Member; (Minority) Stewart Jeffries, 
Counsel; and Tim Cook, Professional Staff Member.
    Mr. Johnson. This hearing of the Committee on the 
Judiciary, Subcommittee on Courts and Competition Policy will 
now come to order.
    Without objection, the Chair is authorized to declare a 
recess.
    Last week, the NFL went before the Supreme Court seeking 
immunity under the antitrust laws.
    It is a simple question. When the NFL and its 32 teams get 
together and make business decisions like apparel licensing, 
are they a group of competitors subject to the antitrust laws, 
or are they more like a board of directors incapable of 
illegally conspiring with themselves?
    Single-entity protection established by the Copperweld case 
would protect many of the business decisions made by the league 
and its 32 teams from challenges as illegal anticompetitive 
contracts and conspiracies.
    The NFL argues that it deserves this immunity because it 
acts as a single entity in promoting the ``NFL product.''
    What is less clear is where the NFL product ends. What are 
the boundaries of single-entity status? As a single entity, 
could the NFL eliminate free agency?
    Could they impose a salary structure on coaches and 
personnel? Could they move teams whenever they did not get more 
local tax breaks? Would they be able to charge $400 for a 
jersey?
    Would they be able to move all of their games to the NFL 
network and turn playoff games into pay-per-view? Co-brand 
credit cards and set rates and fees associated with those 
cards? And the list of possibilities is endless.
    Last week in front of the Supreme Court the NFL said that 
the league should be able to determine the price tag for each 
team. And this kind of unlimited control would not stop at the 
NFL, ladies and gentlemen. In the event of a pro-NFL decision 
by the U.S. Supreme Court, other sports leagues are likely to 
follow.
    Antitrust experts have also predicted a spillover effect 
into other markets. Credit card networks and real estate 
listing services, among others, might start claiming immunity 
from parts of the antitrust laws.
    What I want to know is why does the NFL need special 
antitrust immunity? The NFL has sought antitrust immunity from 
Congress multiple times over the past few decades. Time and 
time again, Congress has said no. The NFL is seeking indirectly 
from the courts what it could not get from Congress.
    The only thing that immunity would do would be to eliminate 
so-called ``frivolous'' antitrust litigation. Well just about 
everybody thinks that litigation is frivolous when they are the 
defendant.
    In recent years, the Supreme Court's decision in Twombly, 
Credit Suisse and Trinko have raised the bar for plaintiff 
litigants in antitrust cases. A pro-NFL decision could raise 
that bar even higher.
    As a former judge, I can assure you there is no way to 
write a law that preserves only good cases and weeds out the 
bad ones. I look forward to what I am sure will be a lively 
debate on these issues.
    With that, I now recognize my colleague, Ranking Member 
Howard Coble, the distinguished Ranking Member of the 
Subcommittee, for his opening remarks.
    But before I do that, I would like to point out that votes 
are pending, or votes are soon to be announced. And at the 
appropriate point, we will recess the hearing to go take those 
votes. I think there is four of them. And then we shall come 
back and resume.
    Mr. Coble?
    Mr. Coble. Thank you, Mr. Chairman. Thank you for calling 
the hearing.
    Thank you all for being in attendance today. When it comes 
to protecting jobs, Mr. Chairman, particularly in the textile 
industry in my congressional district, pardon my modesty, but I 
will take a back seat to no one.
    The V.F. Corporation is located in Greensboro, North 
Carolina, which is in my district, and has a very significant 
interest in its business with NFL Properties, manufacturing NFL 
jerseys. As you can imagine, we are very interested in today's 
hearing.
    It seems relatively clear to me that any sports league must 
act as a single entity in order to produce the sport. Without a 
schedule, rules, basic equipment or other guidelines, the sport 
would have no value. There would be chaos if the Carolina 
Panthers, for example, had to negotiate who they were playing 
and the rules for each game.
    The question of when it is rational for the NFL to act as a 
single entity for antitrust purposes gets a little murky beyond 
its product of games on the field.
    However, to my mind, the question presented by the American 
Needle case, whether the NFL acts as a single economic entity 
for marketing purposes, is also pretty clear.
    The NFL would not function as a marketing entity if some or 
all of its teams refused to license their marks collectively. 
Fans would be damaged because they would not be able to get 
merchandise with their favorite team's logo or could only 
purchase it at the price that their team was willing to sell 
its license.
    Manufacturers would be damaged because they would have to 
negotiate with individual teams for different products over 
different lengths of time, thereby dramatically raising their 
costs of production.
    And the league's value would be diminished because not all 
the teams would be well marketed and because some teams might 
choose to license their products for goods that do not 
represent the best interest of the league and its brand.
    Finally, Mr. Chairman, the revenues and profits are shared 
equally throughout the league. Indeed, the plaintiff in this 
case, American Needle, seemed to enjoy contracting with the NFL 
and receiving all 32 team logos when it was an official 
licensee.
    But once the league opted to go with different--with a 
different hat manufacturer, American Needle decided to sue the 
league over its collective bargaining practices.
    It is apparent that the antitrust laws exist to protect 
competition, not competitors. The district court of the Court 
of Appeals felt that the NFL's licensing practice was valid. I 
am inclined to agree.
    Having lost the benefit of that bargain, it appears that 
American Needle had a case of manufacturer's remorse and 
attempted to obtain through litigation that which it could not 
obtain through normal negotiation.
    I recognize that the Supreme Court's decision in this 
matter could have an impact beyond the instant set of facts. 
However, without the decision in hand, it is too early, it 
seems to me, to tell what Congress needs to be concerned about 
here, if anything.
    I am interested in ensuring that the NFL--or any other 
professional sports league, for that matter--does not abuse its 
power, but I am also concerned that stakeholders use today's 
forum--hearing as a forum to speculate and draw conclusions 
about the NFL before the Supreme Court's decision.
    That being said, I encourage all the witnesses to proceed 
with the requisite amount of caution, because there is clearly 
more at stake than the case at hand.
    I yield back the balance of my time, Mr. Chairman.
    Mr. Johnson. Thank you, Ranking Member Coble.
    We have about 7 minutes and 35 seconds left on this first 
vote, and I think what I would like to do, if it is okay----
    Mr. Coble. Sure.
    Mr. Johnson [continuing]. Is to just introduce the 
witnesses, and thereafter we can depart.
    Mr. Coble. That would be fine.
    Mr. Johnson. All right. Thank you.
    I am now pleased to introduce the witnesses for today's 
hearing. Our first witness is Mr. Gary Gertzog, senior vice 
president for business affairs and general counsel to the 
National Football League.
    Mr. Gertzog oversees the league's commercial operations 
and--including media broadcasting, consumer product licensing 
and intellectual property.
    Welcome, Mr. Gertzog.
    Our second witness is Mr. Kevin Mawae, and--actually, 
Mawae--starting center for the Tennessee Titans and current 
president of the National Football League Players Association.
    A 16-year veteran, this LSU grad was just named to his 
eighth pro bowl after helping running back Chris Johnson set 
the NFL record for yards from scrimmage this past season.
    Welcome, Mr. Mawae. And congratulations on how your team 
snapped back after so many disappointments prior to this 
season, a testament to the human spirit collectively as a team.
    Next we have Mr. Bill Daly, deputy commissioner of the 
National Hockey League. Mr. Daly worked previously at the law 
firm of Skadden Arps in New York before joining the National 
Hockey League as chief counsel.
    Welcome, Deputy Commissioner Daly.
    And finally, we have Professor Stephen Ross from Penn 
State. Professor Ross is one of the Nation's most renowned and 
most accomplished sports antitrust experts.
    Mr. Ross worked previously as an antitrust attorney at the 
Federal Trade Commission and the Antitrust Division of the 
Department of Justice. He has also served as counsel to the 
Senate Judiciary Committee under Senator Metzenbaum. Mr. Ross--
so that tells you about how--or gives you idea to date for this 
fine gentleman here.
    Mr. Ross serves as pro bono counsel to the American 
Antitrust Institute and the Consumer Federation of America on 
issues relating to sports antitrust.
    Welcome, Professor Ross.
    And I want to thank each one of you for your willingness to 
come and participate at today's hearing. Without objection, 
your written statements will be placed into the record, and we 
would ask that you give us about 5 minutes before we come back.
    Actually, it is going to be a little longer than that, but 
about 20 to 30 minutes. And when we come back we will begin 
with your--with testimony. Thank you very much. This hearing is 
recessed.
    [Recess.]
    Mr. Johnson. Ladies and gentlemen, we are waiting on one 
other very distinguished gentleman to arrive on our 
Subcommittee, so it shouldn't be much longer. Thank you.
    This hearing is back in session, and before I turn it over 
to the witnesses for their opening statements, I want to extend 
the invitation to the Ranking Member of the full Committee, Mr. 
Lamar Smith of the great state of Texas, for his opening 
remarks.
    Mr. Smith. Okay. Thank you, Mr. Chairman. I also want to 
thank you for your courtesies.
    When the vote came at 2 o'clock and that was the beginning 
of the hearing, I went to go vote, never thinking that you all 
would act so quickly. And I know you had the opening statements 
prior to the votes, and I appreciate your, therefore, letting 
me add my opening statement after the votes.
    Mr. Chairman, the American Needle case involves a dispute 
involving an apparel manufacturer that lost a hot contract with 
the NFL because the NFL had entered into an exclusive apparel 
rights contract with Reebok.
    However, depending on how the Supreme Court rules on this 
case, the NFL may be able to claim that it acts as a single 
entity and not 32 individual teams for antitrust purposes in a 
broad variety of transactions.
    Granting the league single-entity status means that it 
would be immune from antitrust scrutiny with respect to 
internal business decisions, not just negotiations with apparel 
manufacturers but potentially also labor disputes or the 
negotiation for television rights.
    With respect to television rights, the NFL currently makes 
use of the Sports Broadcasting Act, which gives a limited 
antitrust immunity to sports leagues for the purposes of 
negotiating television packages.
    However, if the NFL is viewed as a single entity for all 
negotiation purposes, then the Sports Broadcasting Act could be 
rendered superfluous. A favorable ruling for the NFL could 
eliminate one tool, antitrust suits against the team owners, 
which the NFL Players Association has used to extract favorable 
terms from the league.
    Excuse me, Mr. Chairman.
    However, given that the NFL Players Association and other 
professional sports unions are the wealthiest labor unions 
around, one wonders whether they need any extra leverage.
    One particularly wonders this when other unions such as the 
United Auto Workers cannot sue fully integrated companies like 
General Motors under the antitrust laws to obtain relief that 
they cannot get from the collective bargaining system.
    This case could significantly impact the other sports 
leagues, including the National Basketball Association, the 
National Hockey League and, to a lesser extent, Major League 
Baseball.
    As various amicus briefs have argued, the case could also 
implicate all joint ventures. This outcome could have dramatic 
effects on antitrust law generally and might well merit 
congressional response. This case was argued just last week, 
and the court's decision is not likely to come out for several 
months.
    This is the third hearing in 3 months that the House 
Judiciary Committee has held on matters relating to the NFL. 
The first two hearings were on the legal implications of head 
injuries suffered while playing professional football. That 
will also be the topic of another field briefing in Houston on 
February 1st.
    While these are important issues, they are not the only 
important issues that the Committee should consider. We should 
hold hearings on the attempted Christmas Day terrorist attack 
on a Northwest Airlines flight bound for Detroit, the 
Department of Justice's decision to drop charges against New 
Black Panther Party members for voter intimidation, and the 
question of whether to close the Guantanamo Bay detention 
facility. All these are full Committee jurisdiction issues.
    But the NFL and NFLPA are literally and figuratively big 
boys. They do not need Congress' help to referee every business 
dispute. That is what the courts and the labor negotiation 
process are for.
    Mr. Chairman, again, thank you for your courtesies, letting 
me make an opening statement slightly late, and I will yield 
back the balance of my time.
    Mr. Johnson. You are quite welcome, my friend.
    And what I would like to do now is open it up for the 
written--excuse me, for the oral statements of the witnesses. 
You will each have 5 minutes. Okay.
    Well, I will tell you what. Before we go down that road, I 
would like to fulfill my duty and my obligation, which is to 
give my Chairman an opportunity to make a opening statement.
    Mr. Chairman?
    Mr. Conyers. Thank you. I am happy to be here with you, and 
I always like to comment after the Ranking Member of the full 
Committee and listen to his instructions as to which hearings 
ought be given priority, because that is an important way that 
we keep comity in the Committee. So I will take his 
recommendations under consideration.
    But these hearings on sports I think are pretty important 
because, first of all, this is more than just who is going to 
make the caps for the football players' league.
    The question here may get into antitrust considerations, 
and this is what we are here to learn more about today--is that 
this--the case that is pending--and I did a lot of work, 
Lamar--I didn't do a lot of work, but my staff did the work.
    But I asked this question, how many cases--how many 
hearings have we had in which there was an anticipated ruling 
from the court that would have a profound effect on whatever 
the subject matter was, because I hadn't been thinking that 
much along those lines.
    And I found out that there were plenty--namely, the civil 
rights cases, the Voter Rights Act, the--what were some of the 
others? Which? Oh, yes, the Jefferson case in Louisiana, in 
which the former Chairman of the Committee was active in 
getting into the court.
    And so what I am more worried about, rather than who makes 
caps, is--oh, affirmative action cases, voter rights cases--oh, 
is this the whole sheet? Why don't I just put it in the record 
instead of reading it all? There is one, two, three, four, 
five--six cases.
    So this is what we do. As a matter of fact, that is why the 
Committee has its name, Judiciary Committee. There is a 
connection here. We are not the court, but we look--we oversee 
the court.
    Now, how will the players be affected by the ruling that is 
pending? Well, for one thing, the league could impose a uniform 
salary structure on players, coaches and other non-player 
personnel. I don't say that that would automatically happen, 
but that is a direction that it might be going in.
    It could affect the free agency concept, as the only option 
would be a player strike. As we all know, those things are 
sometimes limited. As a matter of fact, one may be looming up 
now. I hope to get some insight from the witnesses on this.
    And it is not apparent what actions would be preserved 
under the labor exemption itself if the Supreme Court happens 
to rule in favor of the league.
    And then what should the role of the legislature be if this 
single-entity concept prevails in the court? This will depend 
on the breadth or narrowness of the Supreme Court decision 
itself.
    But it seems to me that we must ensure the rights of the 
players to protect players as well as just look out for fans. 
And then we can have some unintended consequences applying 
joint ventures outside of the sports context.
    And I close with this observation, that both the Department 
of Justice and the Trade Commission have expressed reservations 
about treating integrated entities with less favor than single 
entities, the concern that such a decision might have far-
reaching implications for joint ventures among, for example, 
credit card networks, health care agencies, and thus impairing 
those two--the DOJ and the Trade Commission's ability to 
enforce antitrust laws.
    And so, witnesses, I look forward for your clarification 
and points of view on these several issues.
    I thank the Chairman for his indulgence.
    Mr. Johnson. Thank you, Mr. Chairman.
    And without further ado, each of you all will have 5 
minutes to make your opening statements. You will notice the 
lighting system down there. It is green when you start. At the 
end of 4 minutes, it turns yellow. And then at the end of the 5 
minutes, it turns red, and--so keep a close eye on that.
    Anything that you don't say will be in your written 
remarks, and those will be submitted for the record.
    And you will note that we will have--after each witness has 
presented his or her testimony, Subcommittee Members will be 
permitted to ask questions, subject to the 5-minute limit.
    Mr. Gertzog, please begin.

  TESTIMONY OF GARY GERTZOG, SENIOR VICE PRESIDENT, NATIONAL 
                 FOOTBALL LEAGUE, NEW YORK, NY

    Mr. Gertzog. Good afternoon, Mr. Chairman, Ranking Member 
Coble----
    Mr. Johnson. You may want to hit that microphone----
    Mr. Gertzog. Good afternoon, Mr. Chairman, Ranking Member 
Coble, Members of the Subcommittee. My name is Gary Gertzog. I 
am senior vice president, business affairs and general counsel 
of the National Football League.
    I appreciate the opportunity to testify before you this 
afternoon on the antitrust implications of American Needle v. 
NFL.
    Last week, the nine justices of the United States Supreme 
Court heard oral argument in a lawsuit brought by a former NFL 
headwear licensee challenging the NFL's decision to grant an 
exclusive license to another company.
    The question in this case is whether the NFL, NFL 
Properties and the NFL's 32 member clubs function as a single 
business entity when deciding how to promote NFL football 
through licensing of league and club trademarks on headwear 
products.
    The district court and the Seventh Circuit Court of Appeals 
each agreed with our long-held position that the NFL is a 
single business entity for these purposes.
    In a previous case, the Seventh Circuit held that the 
question of whether a professional sports league acts as a 
single entity should be decided on a league-by-league, aspect-
by-aspect basis. We believe that approach is the correct way to 
analyze the case before the Supreme Court.
    American Needle petitioned the court to review the Seventh 
Circuit ruling. The NFL chose to support the petition not 
because we agreed with American Needle's position on the merits 
but, rather, in an attempt to obtain a national and uniform 
rule confirming that the Seventh Circuit's decision was 
correct.
    The NFL should be treated like any other business in making 
decisions about how to best promote its product and how best to 
respond to consumer demand. This case is not about any other 
aspect of the NFL's business.
    It is not about labor relations, franchise relocation or 
our broadcast policies. Indeed, our collective bargaining 
relationship with the NFL players is governed by Federal labor 
law, not by the antitrust laws.
    The American Needle case is simply about the NFL's ability 
to license its trademarks like any other business. There are no 
other issues before the Supreme Court.
    The NFL's mission is to produce a premier entertainment 
product that appeals to the broadest possible audience. As part 
of that effort, we encourage fans and potential fans to 
identify with the NFL and their favorite team in a variety of 
ways.
    Those efforts include ensuring that fans of all teams have 
access to a broad variety of high-quality, appealing consumer 
products that bear NFL and team marks and logos. Those 
promotional efforts have been successful. We are America's most 
popular sport, with over 180 million fans.
    The NFL produces an annual integrated series of more than 
250 football games leading to the playoffs and culminating in 
the Super Bowl. Each team is inherently incapable of generating 
on its own a single NFL game.
    Every member club is dependent upon every other member club 
to create what we know as NFL football. The league controls all 
aspects of the production of NFL football. It determines when 
and where the games are played, the rules of the game, the 
playing schedule and rules relating to how the entertainment 
product is produced and presented to fans.
    While the NFL clubs compete on the field, they are partners 
in a business enterprise. In fact, approximately 80 percent of 
all league and club revenues are shared among the member clubs. 
They engage in extensive revenue-and cost-sharing. Revenues 
from licensing marks and logos are shared equally among the 
member clubs.
    Such economic integration has led to competitive balance on 
the football field and made it possible for small market teams 
such as Green Bay and New Orleans to compete effectively with 
large market teams.
    This very much serves consumers' interest. The NFL has more 
clubs that play in more communities than any other sports 
league in this country. Because of the league's extensive 
revenue-sharing and promotion of all of its members, all clubs 
have a comparable chance at success on the playing field.
    For example, of the four teams that remain in the playoffs 
this year, three represent smaller markets. Fans in New 
Orleans, Indianapolis and Minnesota continue to root for their 
favorite teams this year.
    Mr. Chairman, antitrust lawsuits are complex, time-
consuming and extremely costly. The NFL has spent millions of 
dollars defending suits like the one American Needle brought. 
Even the threat of such costly lawsuits is anticompetitive and 
inconsistent with consumer welfare because it chills 
competitive zeal to the detriment of consumers.
    Our business partners are entitled to know when they are 
doing business with us whether they are buying a license or 
whether they are buying a lawsuit. Since 1963 when NFL 
intellectual property was first marketed on a collective basis, 
NFL Properties has increased exponentially the volume, variety 
and quality of NFL-licensed products available to consumers.
    The centralized licensing and marketing structure of NFL 
Properties has served the interests of consumers and 
contributed to the success, popularity and growth of NFL 
football.
    Thank you, and I look forward to your questions.
    [The prepared statement of Mr. Gertzog follows:]
                   Prepared Statement of Gary Gertzog

[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]


    Mr. Johnson. Thank you, Mr. Gertzog.
    Mr. Mawae? What--Mawoo? What is it, sir?
    Mr. Mawae. It is Mawae.
    Mr. Johnson. Mawae.
    Mr. Mawae. Yes, sir.
    Mr. Johnson. All right. Thank you.

 TESTIMONY OF KEVIN JAMES MAWAE, PRESIDENT, NATIONAL FOOTBALL 
           LEAGUE PLAYERS ASSOCIATION, WASHINGTON, DC

    Mr. Mawae. Thank you. Good afternoon, Chairman Johnson, 
Ranking Member Coble and other Members of the Committee for 
inviting me here today to take part in this important hearing.
    My name is Kevin Mawae, and I am the president of National 
Football League Players Association. I have played professional 
football for the last 16 years. I am the--currently the 
starting center for the Tennessee Titans. I have played for the 
New York Jets and for the Seattle Seahawks, where I was the 
36th pick overall in the 1994 draft.
    I have had the privilege of being a seven-time Pro Bowl 
selection and just recently named to my eighth pro bowl, and I 
am a three-time All-Pro player.
    More importantly, my career has enabled me to focus on 
charitable endeavors with Children's Cup, Feed the Children and 
Building Blocks for Kids. And twice with the New York Jets I 
was named Community Man of the Year.
    When I began my professional career, just 1 year had passed 
since the landmark settlement of the Reggie White case that led 
to the significant gains of players, giving me a unique 
perspective on an era of labor peace built upon the ability of 
players to bring and win antitrust claims.
    One of the greatest honors in my career is serving as 
president of the NFLPA, a position that I was elected to by 
players of all 32 teams. As president of the NFLPA, I am tasked 
with ensuring the welfare of my peers, a job that I take 
extremely seriously, and one that brings me before you today. 
And some of our members are in this room and around the halls 
of Congress.
    American Needle v. NFL is a case that could change the 
sports world as we know it. There have been claims by some that 
this case has been over-hyped. There are those who say that 
this case is simply a small licensing dispute without broader 
ramifications.
    Put simply, this is an effort to deceive the Supreme Court, 
Congress and the general public. Why else would the NFL seek to 
review a case that it has already won not once but twice?
    Just last week, during the oral arguments at the Supreme 
Court, the NFL finally confirmed just how broad this case 
really is. In response to a question from Justice Scalia, the 
NFL stated that it should be allowed to unilaterally set the 
price for each team, prompting Justice Scalia to remark that 
his question was meant to be taken into the absurd.
    After hearing from the NFL, Justice Sotomayor stated the 
obvious. The NFL is seeking through this ruling what it has not 
gotten from Congress, an absolute bar to the antitrust claim.
    Indeed, Congress has repeatedly refused to grant the NFL a 
broad antitrust exemption. Even the exceptions only to prove 
this rule. The Sports Broadcasting Act, for example, only 
grants a limited antitrust exemption with certain requirements 
imposed upon the league.
    The NFL's ideal post-American Needle world is indeed 
chilling. Sports leagues could set ticket prices and prevent 
teams in the same or adjacent markets from competing for fans; 
owners could force--could end free agency by restricting player 
movement from team to team and imposing a salary schedule for 
coaches and players; leagues could transfer all television and 
radio rights of their games, including local rights, to their 
own, wholly-owned subscription cable and satellite networks; 
leagues could even require any stadium to be built be 
completely subsidized by local taxpayers.
    I think it is important to note that the NFL has 
unsuccessfully sought this blanket exemption for decades. It is 
the holy grail of would-be antitrust defendants.
    Recognizing the once-in-a-generation chance to find success 
through American Needle, the other three major professional 
sports joined the NFL by filing friends-of-the-courts briefs.
    It is clear that American Needle is just the latest attempt 
by sports leagues to find their vaunted holy grail. The case 
may be their best chance at success yet, due to the wolf-in-
sheep's-clothing approach of an apparel license case.
    Recognizing the imminent danger American Needle presents, 
it has sparked great interest from outside the sports world, 
with the Department of Justice, Federal Trade Commission, 
Merchant Trade Association, the American Antitrust Institute 
and an independent group of 20 prominent economists weighing in 
against the NFL.
    Despite the nuanced approach that the NFL is using in 
American Needle, an antitrust exemption must be resoundingly 
rejected. As I mentioned before, I have been a professional 
football player for 16 years, starting the year after the 1993 
collective bargaining agreement brought unrestricted free 
agency to players in the NFL for the first time in its history.
    In the past, players were subject to systems severely 
limiting their rights to market their services to other clubs 
when their contracts expired. It was a successful antitrust 
lawsuit that ended those restrictions.
    As a two-time free agent, and now one for the third time, I 
can personally attest to the fact that the 32 teams of the NFL 
do compete vigorously for players, coaches and fans.
    I am proud to be the president of an organization whose 
success has been built upon the likes of players like Bill 
Radovich, Freeman McNeil and Reggie White, who had the courage 
to sue their teams in order to secure rights for all players.
    Over the course of my career, I have seen firsthand how 
that antitrust lawsuit catapulted the league to unprecedented 
popularity by bringing parity to the league, free agency to the 
players, and a year-round football season where there is always 
hope for the season for the fans.
    It is not only fans and players that have benefited during 
the 17 years. The league itself has experienced significant 
economic growth. NFL franchise values have increased by 550 
percent since 1993.
    Again, that is 550 percent, during this era of free agency 
and parity, built upon a foundation of labor peace. As I sit 
here today, I am not sure why anyone would want to tamper with 
such a profitable economic model.
    The league has also experienced unmatched growth in the 
past couple of seasons, even while the world's worst economic 
crisis since the Great Depression raged.
    In 2008, the NFL experienced its third most profitable 
year. Revenues rose to $7.6 billion, more than any other 
league. Average team profits increased 31 percent, and while 
labor costs increased only 4 percent.
    While regular folks and companies are cutting costs 
wherever they can, the NFL continues to renew lucrative 
agreements that guarantee revenue beyond the 2011 season, 
whether football is played or not.
    This year, fans watched NFL games in their largest number 
since 1990, with regular-season games being the highest-rated 
local program 89 percent of the time, up from 55 percent in 
2001.
    Viewers did not come to the expense of ticket sales. League 
attendance declined a negligible percent--1 percent when the 
commissioner himself estimated that they would be over 100 
percent--no, he was off by 100 percent.
    The NFL teams played in front of less-than-full stadiums 
less than 9 percent of the time in 2009. To be sure, this era 
of labor peace has benefited the league, owners and players 
alike.
    Our labor peace, which is secured by the antitrust laws, 
has also benefitted the hundreds of thousands of stadium 
workers, small business owners and their employees that derive 
significant revenue from my beloved sport--revenue and 
paychecks--this is the last one--and that means a great deal to 
many families in this current economic climate.
    And, sir, I am not a product. I am a person, and I am a 
player in the NFL. Thank you.
    [The prepared statement of Mr. Mawae follows:]
                   Prepared Statement of Kevin Mawae

[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]


    Mr. Johnson. Mr. Daly, please proceed.

    TESTIMONY OF WILLIAM L. DALY, III, DEPUTY COMMISSIONER, 
              NATIONAL HOCKEY LEAGUE, NEW YORK, NY

    Mr. Daly. Chairman Johnson, Ranking Member Coble and other 
Members of the Subcommittee, thank you for the opportunity to 
appear before the Subcommittee today to testify on the 
antitrust implications of American Needle v. The National 
Football League.
    My name is Bill Daly, and I am the deputy commissioner of 
the National Hockey League. Like the NFL, the NHL is structured 
as a legitimate joint venture created by its members to 
produce, promote and sell the fundamental league product, 
professional hockey games, and its constituent products, 
including league and team intellectual property, in competition 
with other sports leagues and entertainment providers.
    Significantly, professional sports leagues such as the NHL 
and NFL compete against a large multitude of single firm 
entertainment providers. However, these leagues often cannot 
compete with one another and against other entertainment 
providers as vigorously as they otherwise would because of the 
threat of litigation under Section 1 of the Sherman Act, which 
prohibits agreements among competitors that unreasonably 
restrain trade.
    All league decisions on how best to produce, promote and 
sell the league's products are inherently pro-competitive 
because none of the league's output would exist but for the 
league and the collaboration among the teams.
    As with the NFL, the economic value of an individual NHL 
member club as well as its intellectual property derives solely 
from its joint participation in the league and its role in 
producing, collectively with the other 29 member clubs, NHL 
hockey.
    If a particular club were not a member of the NHL venture, 
its team, as well as its team-related intellectual property and 
products, would have no meaningful economic value.
    Because of this economic interdependence, the collective 
efforts to market and sell NHL hockey and the venture's output 
are part of the very essence of the NHL enterprise.
    Under the NHL constitution and by-laws, the affairs of the 
NHL are governed by the NHL Board of Governors, which is 
comprised of one representative from each of the thirty member 
clubs.
    Over time, the Board of Governors has made the business 
judgment that NHL hockey and its constituent output are best 
promoted and sold through a combination of, one, collective 
economic activity taken on behalf of all NHL member clubs by 
the league; and two, decentralized, individual economic 
operation by each club in its exclusive home territory, which 
rights are granted under the NHL constitution.
    It must be emphasized that every decision regarding the 
structure and organization of the NHL venture, including the 
delegation of certain economic operations to individual clubs, 
emanates exclusively from the organic documents of the league--
the NHL constitution and by-laws--which can only be modified by 
appropriate vote of the NHL Board of Governors.
    The legitimate scope of the NHL joint venture necessarily 
includes the collective production and, at times, independent 
promotion and sale of NHL hockey and its constituent products, 
all of which derive their value from the league venture as a 
whole.
    Consequently, it defies economic reality for the courts to 
view an agreement among the teams of a professional sports 
league such as the NHL as ``representing a sudden joining of 
two independent sources of economic power previously pursuing 
separate interests,'' the standard articulated by the Supreme 
Court in Copperweld.
    NHL seeks to promote demand for, and fan interest in, its 
product, NHL hockey, and to create, market and sell NHL hockey 
and its constituent products in competition with other 
producers and marketers of sports and entertainment products.
    To effectively compete in the broad entertainment 
marketplace, the NHL member clubs must have the ability to 
jointly decide how best to market NHL hockey, including when to 
centralize and when to decentralize their economic activities.
    The specter of treble damages exposure, significant 
litigation costs and burdensome discovery from rule of reason 
scrutiny under Section 1 of the Sherman Act has the potential 
to create a chilling effect on the structural and innovative 
decision-making of legitimate professional sports league joint 
ventures such as the NHL.
    This risk looms in connection with literally every internal 
disagreement regarding how best to make, promote and sell the 
league venture's product. Consequently, rather than serving the 
marketplace and responding to consumer demand and competition 
from a vast array of other entertainment providers, as would 
any single-firm entertainment provider, professional sports 
leagues are forced to calibrate their innovation and 
competitive vigor to account for the risk of protracted and 
costly rule of reason litigation.
    Indeed, the NHL just spent more than a year in the midst of 
such litigation in the MSG case that is described in my written 
statement. The effects of this case on the NHL's business were 
significant.
    The broad-ranging litigation results in an enormous 
expenditure of both monetary and human resources, a disruption 
to normal business operations, uncertainty for transactions 
with existing and potential business partners, and adverse 
effects on the league's relationship with its fans.
    The litigation sought to have a Federal court insert itself 
into the NHL boardroom in order to review virtually every one 
of the clubs' output-related business decisions, the vast 
majority of which are decades old now.
    We don't believe such scrutiny is warranted. And as a 
result, we believe the American Needle case was correctly 
decided by the Seventh Circuit.
    I will be happy to answer any questions you have at the 
appropriate time.
    [The prepared statement of Mr. Daly follows:]
               Prepared Statement of William L. Daly, III

[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]


    Mr. Johnson. Thank you, Mr. Daly.
    Last but not least, Professor Ross?

 TESTIMONY OF STEPHEN F. ROSS, LEWIS H. VOVAKIS DISTINGUISHED 
FACULTY SCHOLAR, PROFESSOR OF LAW AND DIRECTOR FOR SPORTS LAW, 
POLICY AND RESEARCH, PENNSYLVANIA STATE UNIVERSITY, UNIVERSITY 
                            PARK, PA

    Mr. Ross. Mr. Chairman and Members of the Committee, I 
appreciate the invitation to speak to you today about the 
appropriate standards by which to judge antitrust claims 
against sports leagues controlled by club owners who operate 
the leagues in their own parochial self-interest, without any 
economic incentive or legal obligation to set league policy in 
the interests of the sport as a whole.
    Four key points dominate policy considerations regarding 
this issue. One, fans suffer from inefficiencies resulting from 
the control of sports leagues by club owners guided by their 
own selfish, parochial interests.
    Two, single-entity status would result in a significant 
shift of games to more expensive pay and cable media and would 
increase the risk of labor strife.
    Three, contrary to league claims, antitrust scrutiny of 
dominant sports leagues under the rule of reason has worked 
relatively well in protecting the public interest.
    Four, unless a pro-defendant Supreme Court decision is 
limited on an unprincipled and sui generis basis to sports 
leagues, it will likely create huge problems for antitrust 
treatment of competitor collaborations generally.
    Now, in a recent book called ``Fans of the World, Unite!'' 
a prominent British sports economist and I detailed numerous 
areas where the club-run structure of dominant North American 
sports leagues has harmed fans.
    Most prominent are policies that serve neither consumers 
nor the best interests of the league as a whole. These include 
anticompetitive franchise relocation policies, TV blackouts 
that actually reduce overall ratings, inefficient labor market 
rules, and a systemic lack of oversight of individual club 
mismanagement.
    My co-author and I conclude that sports leagues would be 
better off if they actually were single entities, where 
policies were adopted by a single economic driver.
    If Commissioners Selig, Goodell, Stern and Bettman worked 
for boards of directors with a fiduciary duty to the league as 
a whole, many of these inefficiencies would disappear. To 
answer Chairman Johnson's question, the owners are not like a 
corporate board of directors.
    Now, the notion that sports leagues would benefit if 
leagues were controlled by a true single entity is not 
something we simply invented. Rather, in organizing NASCAR, 
founder Bill France recognized that ``it would require a 
central racing organization whose authority outranked all 
drivers, car owners and track owners.''
    In contrast, pundit Bob Costas has acridly observed that 
baseball owners ``couldn't even agree on what to order for 
lunch.''
    Our study concluded that Bill France's efforts on behalf of 
NASCAR to change engineering rules to attract auto company 
investment, develop a business model where clubs relied 
extensively on sponsorship income, expand the appeal of the 
sport from the south to the entire Nation, and increase 
national television appeal through the Chase for the Cup would 
all have been inhibited or blocked if the sport were controlled 
by participating racing teams or racetrack owners.
    Around the world, the modern trend has been to keep league 
operations separate from control of self-interested club 
owners. If the NFL were considered a single entity, however, 
the Sports Broadcasting Act would be rendered a complete 
nullity and NFL need no longer abide by its limits.
    As a result, an NFL scheme to place most of their games on 
their own NFL network and then significantly increase the fees 
charged to watch the games would be perfectly lawful.
    By way of comparison, in 1992 the English Premier League 
signed a new contract assigning TV rights previously awarded to 
free-to-air networks to the Sky Sports cable network. 
Viewership declined from 7 million to 1 million a game, 
although clubs profited substantially from higher rights fees.
    Some of the sharp questioning at last week's oral argument 
signaled concerns that some justices believe our basic 
structure of antitrust enforcement is flawed, and that 
defendants should not have to defend under the rule of reason 
legitimate agreements against meritless complaints.
    It is true that under our system of antitrust laws any 
agreement among competitors is subject to Section 1, and any 
decision by collaborating competitors is the potential target 
of a lawsuit.
    But it is also true, as many cases recent cases 
demonstrate, that these suits can be and are summarily 
dismissed when the plaintiff is unable to demonstrate any 
anticompetitive effect.
    And I add that the bipartisan Antitrust Modernization 
Commission appointed by President Bush, with a clear majority 
with unimpeachable Republican and pro-business credentials, 
rejected claims that our treble damage system of private 
litigation should be scrapped.
    Although surgical repairs on private antitrust litigation 
might be appropriate, the clumsy device of an unprincipled 
expansion of Copperweld to label self-interested, inefficient 
joint ventures as single entities is terrible competition 
policy.
    Ranking Member Coble is correct to want to protect 
legitimate ventures, but to protect against abuse. Calling 
leagues a single entity takes away any possibility that abusive 
actions can be remedied under the antitrust laws. If the 
Supreme Court so rules, Congress should overrule.
    Mr. Chairman, transforming a duck into a goose, I suggest, 
would be better for consumers. Simply calling a duck a goose, 
as the NFL wants, would not. Thank you for inviting me to 
testify.
    [The prepared statement of Mr. Ross follows:]
                 Prepared Statement of Stephen F. Ross

[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]


    Mr. Johnson. Thank you, Professor.
    We will now begin with questioning. I will start for my 5 
minutes.
    I would like to ask Mr. Gertzog that, as a single entity, 
will it be easier for the league to shift more of its games 
from free over-the-air broadcasting to the NFL network cable 
channel? Will it be easier for the league to do that?
    Mr. Gertzog. Mr. Chairman, as I indicated in the opening 
statement, what the NFL is seeking in the American Needle case 
is a ruling consistent with the Seventh Circuit decision that 
for purposes of one aspect of its business, licensing 
intellectual property which promotes its game, the NFL operates 
as a single entity.
    Mr. Johnson. Well, no, I understand that. I am just asking 
a simple question. Will it be easier for the league as a single 
entity to take most of its games or all of its games off of 
free broadcast TV and only allow the rich and the powerful to 
watch the games on cable or satellite?
    Mr. Gertzog. Mr. Chairman, right now, as you are probably 
aware, 90 percent of the NFL games are broadcast on free over-
the-air television.
    Mr. Johnson. And are----
    Mr. Gertzog. The other 10 percent of the games are 
broadcast on cable, but the fans in the markets of the 
participating teams can watch those games. That is truly unique 
in all of sports.
    We have a longstanding commitment to free over-the-air 
television. We recently extended our television agreements 
through 2013. So we don't see any change.
    Mr. Johnson. Well, I mean, but it is possible that it 
will--well, I mean, it is going to be easier if you are granted 
single-entity status to shift more games to pay TV or NFL cable 
network, or whatever you would call the entity, at the expense 
of free broadcast games. Isn't that true?
    Mr. Gertzog. We don't agree with that. We don't see that 
being a function of a single-entity decision in the American 
Needle case.
    Mr. Johnson. All right.
    And now, Professor Ross, I am sure you would disagree with 
that. What would be your take on that, sir?
    Mr. Ross. Mr. Chairman, in the first place, the NFLPA 
statement is absolutely correct. The NFL wouldn't have asked 
the Supreme Court to grant cert if they just wanted to win this 
thing and make sure that this one narrow issue, which they 
already won would have been prevailed.
    If the Supreme Court rules aspect by aspect and simply says 
a very narrow ruling, then it is up to new rulings later, and 
it wouldn't probably raise your fears.
    But if the Supreme Court broadly adopts what the NFL has 
been asking in their briefs, which is they are a single 
entity--if we accept Mr. Daly's legal position as the law--then 
a decision to put all the games on NFL Network is the decision 
of a single entity.
    It would not be challengeable under Section 1 as an 
agreement among the clubs. The Sports Broadcasting Act, which 
only exempts agreements among clubs, and assumes that these 
things were agreements among clubs, would not apply.
    And unless one could come up with a theory that by putting 
it on the NFL Network the NFL was somehow contributing to the 
monopolization of broadcast, or something like that, it would 
be completely immune from antitrust scrutiny.
    So the NFL can claim its commitment here. Perhaps of a 
greater concern of free market conservatives, the NFL could, if 
the ruling comes back, keep coming back and making political 
deals with your--you know, you could cut a deal with them 
yourself where they make a voluntary deal and they say, ``We 
will keep 14 games on TV,'' and then you could say, ``Well, I 
am going to introduce legislation,'' and then they go, ``Okay, 
13 games on TV.'' They could do all that, and they could have 
a--but legally, your question is correct.
    Under Section 1, if they win, there is no antitrust remedy 
to moving the games to NFL Network.
    Mr. Johnson. All right. Thank you.
    And let me ask this question. A Reebok executive publicly 
stated that NFL-branded caps that used to cost $20 can now be 
priced at $30 because Reebok no longer has any competition in 
this market. How is the consumer better off when the league and 
the 32 teams act together in this way, Mr. Gertzog?
    Mr. Gertzog. The consumer has been much better off since we 
entered into the agreement with Reebok. The consumer has found 
that the----
    Mr. Johnson. The price has gone up or gone down for 
merchandise?
    Mr. Gertzog. We have products priced at all different price 
points.
    Mr. Johnson. Well, I mean----
    Mr. Gertzog. If you go on----
    Mr. Johnson [continuing]. New products come online and----
    Mr. Gertzog. Yes. If you----
    Mr. Johnson [continuing]. That kind of thing, but----
    Mr. Gertzog. If you go----
    Mr. Johnson [continuing]. But as far as the products that 
were already online at the time of the exclusive agreement with 
Reebok, isn't it true that there will be no--well, there will 
be no breaks they can put on how--that can be put on the price 
of merchandise?
    Mr. Gertzog. Mr. Chairman----
    Mr. Johnson [continuing]. As you feel like you could get.
    Mr. Gertzog. Mr. Chairman, I respectfully disagree with 
that. You know, number one, the NFL does not set the price for 
its products. Those decisions are made, number one, by a 
licensee that will sell to a retail store; number two, the 
retail store will make a determination as to how much it wants 
to charge to the consumer.
    If you go online today, you will see that NFL caps are 
priced competitively with caps from all of the other sports 
leagues, colleges, entertainment providers, branded companies 
like Nike. There are caps that are more expensive than NFL caps 
and there are caps of other companies that are less expensive.
    And we have found that the consumer has the ultimate vote. 
If the consumer believes the hat is too expensive, the consumer 
will not purchase the cap. The consumer will purchase a cap 
from a different sports entity. So in this town, if someone 
believes the Redskins cap is too high, they can go purchase a 
Capitals cap.
    Mr. Johnson. Well, but it just can't say Redskins and have 
the trademark on there, the NFL and the--what is it? A arrow or 
something like that, with a redneck, or something--there is 
something of that nature. You can't find an official NFL cap 
unless you do it through an authorized entity.
    And you would be able to control the price to--that that 
entity would sell the hat for. Is that true?
    Mr. Gertzog. It is not true because we operate in a very 
competitive sports and entertainment marketplace. So as I said 
earlier, the consumer has the ultimate vote.
    If the consumer believes the cap is too expensive and they 
want an NFL item, they can buy a different item. We have 
thousands of licensed products, and the consumer has many, many 
different options.
    Through the Reebok agreement, they were able to, over the 
past few years, upgrade the quality of the products. The 
consumers have responded quite well to that. They have extended 
the number of products to our fans--women's products that 
didn't exist before, many different products for kids.
    So we think this is----
    Mr. Johnson. So it is better for----
    Mr. Gertzog [continuing]. Very pro-consumer.
    Mr. Johnson [continuing]. Consumers. Yes, okay.
    Well, let me interrupt you and just ask for your comment 
about that, Professor Ross.
    Mr. Ross. Mr. Chairman, I would like to offer you my 
expertise when I have expertise and not when I don't, and I 
have no idea if Mr. Gertzog is correct or not.
    He made two key statements, though. The consumer has the 
ultimate vote and, relatedly, we operate in a competitive 
merchandise market. If that is so, this case is dismissed 
summarily under the rule of reason with the NFL not being a 
single entity because they are in a competitive marketplace.
    Under the rule of reason, it is only when firms have market 
power or, as Judge Posner wrote, it is only when firms, if they 
err, will not face swift market retribution that the antitrust 
law needs to be concerned.
    So if, in this particular case, the merchandise case, Mr. 
Gertzog is correct, then the proper result in this case is 
summary dismissal of American Needle's claim under the 
antitrust laws.
    Mr. Johnson. Thank you, Professor.
    Next I am going to call upon the Ranking Member, Mr. Lamar 
Smith--I am sorry, the Ranking Member of the Subcommittee, Mr. 
Howard Coble.
    Mr. Coble. Thank you, Mr. Chairman.
    Gentlemen, thank you all for being with us this afternoon.
    Mr. Daly, to what extent do you think that the NHL teams 
act as a single entity? And when do the teams not act as a 
single entity?
    Mr. Daly. Well, I think, clearly, Mr. Congressman, that the 
NHL clubs act as a single entity--they acted when they formed 
the league to become a single entity to produce, promote and 
sell NHL hockey and NHL hockey games and products.
    And all the decisions they make in the production, 
promotion and sale of those products--as decisions made by a 
single entity under the antitrust laws.
    You know, to maybe go back to Chairman Johnson's question a 
little bit, I think sports leagues generally--but the NFL 
also--are constrained by the marketplace in those decisions, 
and they can't willy-nilly make decisions that aren't 
responsive to the competition in the marketplace.
    And we compete with other professional sports leagues and 
other entertainment providers, many of whom are single-firm and 
make those pricing decisions all the time without any concerns 
about Section 1 scrutiny.
    And so our activities within that marketplace are 
constrained by our competition within that marketplace. And to 
the extent there is a dominant position or, as Professor Ross 
indicated, a market power position in the marketplace, there 
are other competition laws that protect consumers in those 
circumstances, not Section 1 of the Sherman Act.
    Mr. Coble. Thank you, Mr. Daly.
    Mr. Mawae, let me put a two-part question to you. Do you 
have any objection to the operation of NFL Properties, A? And 
B, is it your contention that apparel and merchandise revenues 
sold under this single-entity theory are distributed evenly 
throughout the league?
    Mr. Mawae. To answer your second question first, are they 
sold--do you mean sold separately as--or sold as a single 
entity? Can you repeat the question again, the second one, 
first?
    Mr. Coble. Yes. Is it your contention that apparel and 
merchandise revenues or revenues resulting from the sale sold 
under this single entity theory are distributed evenly 
throughout the league?
    Mr. Mawae. Well, I think, first of all, the limited amount 
I know about how the NFL shares their revenues--there is a 
portion of their revenues that are shared equally, but then 
there is a portion that is not.
    Every team has an ability to set prices on certain things. 
Some of that could be merchandise, and some of it could be 
ticket sales, concessions or whatever. But I know there is a 
portion that does go into the shared profits of the NFL.
    But when an NFL team has the ability to market their own 
products, make their own merchandise, then that puts more 
pockets in that single owner's--more money in that single 
owner's pocket, with a percentage of it due--having to go back 
to the NFL.
    I don't know how much. We are in the process through our 
CBA negotiation of finding out how much they are making, how 
much they are sharing and how much they are not sharing. And 
that is information that we will get to receive.
    To answer your other question, I cannot answer that. It is 
not my case. It is not my expertise or my knowledge to be able 
to answer that question.
    Mr. Coble. I thank you for that.
    Mr. Gertzog, are there areas that you would concede that 
the NFL could or would never assert single-entity status?
    Mr. Gertzog. Yes. At the moment, there was an example that 
was used during the Supreme Court argument that if the NFL 
clubs decided to go into a new venture, in the trucking 
business as an example, that would be one that would fall 
outside of the single entity for the National Football League.
    I may want to add, you know, one other point on Mr. Mawae's 
response. You know, the union itself, through their licensing 
affiliates, has their own agreement with Reebok.
    They have supported the agreement with Reebok that we have 
had since the inception in 2001. And they have granted Reebok 
exclusivity for uniforms that the players wear and that are 
sold at retail.
    Mr. Coble. Thank you, sir.
    Mr. Gertzog, I am going to put another question to you. 
Would you prefer that your single-entity status be affirmed by 
the Supreme Court or that the law explicitly lists aspects of 
professional sports league that should qualify? What would be 
your preference?
    Mr. Gertzog. Yes, our preference is the one that was 
adopted by the Seventh Circuit where you look at it league by 
league and each facet of its business. And certainly, with the 
Supreme Court decision, they would be reviewing an important 
part of the NFL's business.
    And some of the principles and reasoning of that case could 
well extend to other facets of our business, but that is not 
what we asked the court for.
    Mr. Coble. Does this case have any direct bearing on the 
upcoming collective bargaining agreement negotiations?
    Mr. Gertzog. Absolutely not.
    Mr. Coble. Okay.
    Mr. Gertzog. As I indicated in my opening statement, those 
negotiations are governed by the labor laws, not the antitrust 
laws. The NFL owners are committed to working as hard as 
possible to reach a new agreement with the union. We think we 
will reach a new agreement. It is just a question of when.
    Mr. Coble. Thank you, sir.
    Professor Ross, I hadn't forgotten you.
    One final question, if I may, Mr. Chairman.
    Professor, the V.F. Corporation argues that the current 
arrangement by NFL Properties is the best deal for consumers, 
manufacturers and the NFL. Their views are detailed in an 
amicus brief filed with the Supreme Court. Do you concur or 
disagree with the V.F.'s conclusion?
    Mr. Ross. Mr. Coble, I don't know enough about the merits 
of the particular marketing to agree or disagree. Your opening 
statement was one of the best defenses under the rule of reason 
of a reasonable restraint that I have heard in quite a while.
    But my answer is if what you said in your opening statement 
was true, the correct legal response ought to be that under the 
rule of reason the restraint is reasonable.
    But you can imagine a licensing scheme--for example, 
suppose somebody like Jerry Jones of the Cowboys provided an 
innovative marketing scheme, offered to share a lot of revenue 
with the rest of the league, but Ralph Wilson of the Buffalo 
Bills decided, ``I don't want to compete with Jones because he 
is so aggressive, so let's not let any of our members do any 
licensing of the sort.''
    And if he got one-fourth plus one of his fellow owners to 
go along with them, he could block that deal. That would be, in 
my opinion, one of the abuses you talked about.
    So the real question for American Needle is not whether the 
contract with Reebok is a reasonable contract. It may well be. 
The question is whether courts ought to look at it to decide 
whether it is an abuse, as you were worried about, or whether 
it is something reasonable.
    The position that the leagues want to take is that the 
antitrust courts should not look at that at all, and I would be 
interested to hear what possible protections exist for 
consumers other than the FTC act if the leagues win big in the 
Supreme Court.
    Mr. Coble. Thank you, Professor.
    I see my red light is illuminated so I yield back, Mr. 
Chairman.
    Mr. Johnson. Thank you, Mr. Coble.
    And next we will have--what I would like to do--there is a 
important meeting that I need to attend with the speaker, and 
so I am going to go ahead and depart at this time.
    I have asked the Chairman of the full Committee, Mr. 
Conyers, to--whether or not he would be so kind as to continue 
to Chair the Committee, and he has said that he would.
    Mr. Conyers. [Presiding.] I wanted to ask Mel Watt--because 
he is the only jock on this Committee--or ex-jock on this 
Committee. I don't know which, but--oh, I don't want to do this 
without him being in the room.
    But let me ask Mr. Gertzog, what is it that Professor Ross 
doesn't quite get about this whole subject matter that we are 
discussing, from your friendly point of view?
    Mr. Gertzog. I think there is a few things, Congressman. 
You know, number one, the relief that we are seeking is an 
affirmance of the Seventh Circuit ruling focused on the aspect 
of the business that evidence was developed at trial--namely, 
intellectual property licensing involving--products.
    Two, a lot of the opening statement for Professor Ross was 
focused on radical changes to the governing structure of a 
sports league, and we don't think that is really proper subject 
matter for this particular hearing.
    It is an interesting academic discussion, but in real 
life--I have worked at the NFL 16 years. I understand how these 
decisions are made. And they are not made in the parochial 
interest of the owners. The owners understand that the whole is 
greater than the sum of the parts, and they do what is in the 
best interest of the league.
    And in terms of this particular issue, what Professor Ross 
has said is, ``Well, if the NFL is right, let's take it to a 
rule of reason analysis, and I am sure this sounds right. It is 
pro-competitive. Whether it is Reebok, V.F., they have made 
some valid points. Why don't we let it get to that point?''
    And if we do, you are talking about over $10 million of 
litigation expenses, the threat of treble damages, uncertainty 
to our business partners, and that is really not a good way to 
run a business.
    It would put us at competitive disadvantages with other 
companies that we compete against that are single entities and 
do not have to be faced with these sort of threats and 
lawsuits.
    Mr. Conyers. Well, Mr. Daly, what do you think that 
Professor Ross could be enlightened on in a friendly hearing 
like this this afternoon?
    Mr. Daly. I think one of the theories of Professor Ross is 
that sports leagues in their current structure act irrationally 
and, again, protecting parochial interests of the members.
    I can speak for the National Hockey League, and I believe I 
can speak for most other professional sports leagues--that we 
have in our constitution voting rules that generally produce, 
if not all the time produce, rational business decisions that 
are made, so that the interests of a few owners who may have 
parochial points of view on certain subject matters are 
overruled by a majority and, in some cases, super-majority of 
other owners who are looking out for the benefit of the league.
    So I would say that business decisions made by the league 
are economically rational, in the best interests of the league 
and the league's business, and not made for parochial 
interests.
    The other thing I would reinforce is Mr. Gertzog's point 
that while there are defenses to rule of reason and, as 
professor Ross said, some cases may be summarily dismissed, 
they are not summarily dismissed under the rule of reason until 
the parties have engaged in many months, and sometimes years, 
of very expensive discovery on rule of reason issues, on such 
things as market definition and market power, before you get to 
the point where they can be summarily dismissed.
    So it is an enormous waste of resources for professional 
sports leagues but also for plaintiffs in those circumstances, 
and a waste of money.
    Mr. Conyers. Now, Mr. Gertzog, you--it is your suggestion 
that NFL should be a single entity--should be regarded as a 
single entity in the court proceedings?
    Mr. Gertzog. What we are asking is as part of the American 
Needle case, which we are discussing here today, the Supreme 
Court should affirm the Seventh Circuit decision which held 
that for purposes of the NFL's licensing business for apparel, 
the NFL constitutes a single entity.
    Mr. Conyers. So yes or no?
    Mr. Gertzog. In that part of the business, the NFL 
constitutes a single entity. It also gives plaintiffs the 
opportunity to pursue a Section 2 claim. They are not without 
an antitrust remedy.
    Mr. Conyers. Okay. Third time. Yes or no?
    Mr. Gertzog. I am sorry, maybe I didn't understand the 
question.
    Mr. Conyers. Do you remember what the question was?
    Mr. Gertzog. Should the NFL be a single entity in the 
courts?
    Mr. Conyers. Right.
    Mr. Gertzog. And I apologize. I thought I answered the 
question that for purposes----
    Mr. Conyers. I said yes or no.
    Mr. Gertzog. The answer would be yes, for some purposes.
    Mr. Conyers. Wow, this was quite a--all right. It is 
important that we all stay in the same understanding of the 
usage of the English language. So thanks.
    Now, Professor Ross, I hope that you consider yourself 
somewhat enlightened by the friendly discussion that we have 
had so far. Do you have anything to say for yourself?
    Mr. Ross. I am always enlightened when I hear from real-
life people in the business. The Members of this Committee are 
familiar with this issue, and it is one of the reasons why we 
have separation of powers in our country.
    I am quite sure that the Members of this Committee want to 
do what they think is best for the Nation. But push comes to 
shove, they have a very difficult time if what they--what might 
well be best for the Nation happens to be contrary to what 
might be best for the 14th Congressional District of Michigan 
or the 6th Congressional District of North Carolina, et cetera.
    And in that case, not always but often, the Members of this 
body are going to vote the interests of their district first. 
And that is not economically irrational. It is not political 
irrational.
    Similarly, there are going to be times when members of 
sports leagues act in the best interest of their club because 
that is what they are responsible for.
    Mr. Conyers. Lamar, we are not supposed to do that, are we?
    Mr. Smith. Mr. Chairman, I didn't----
    Mr. Conyers. Oh. Well, I don't know how this question got 
turned onto the Members of the Committee, but here we are.
    Mr. Ross. It is just an illustration, Mr. Chairman, that 
any time somebody is a representative of a particular group, 
there are interests--they have two interests. There is a 
conflict of interest in that sense between things that might be 
good for the parochial self-interest and things that might be 
good for the general interest.
    Being at Penn State, we honor Dan Rooney, the former owner 
of the Pittsburgh Steelers and now ambassador to Ireland. And 
if you read his book and look at the prologue by Commissioner 
Goodell, they rave about what a great owner Mr. Rooney is 
because he puts the interests of the league first. That is what 
everybody talks about.
    Now, I would suggest, Mr. Chairman, that if Dan Rooney was 
just like every other person, if the owners were like the way 
Mr. Daly describes them, Dan Rooney would be nothing special. 
Wellington Mara would be nothing special. Jerry Colangelo in 
the NBA would be nothing special.
    All these owners who put the league first are hailed, but 
the implicit reason is because many of their other colleagues 
are not so league-oriented.
    Mr. Conyers. Well, I thought you were going to give a 
profound response to the two fellow witnesses who were--well, 
you look it up, how about?
    And now you are responding to my questions by propounding 
that we sometimes or frequently--I forgot which you said----
    Mr. Ross. Sometimes.
    Mr. Conyers [continuing]. That we put the interests of our 
district over our national responsibilities. Do you know what 
the Constitution says about that?
    Mr. Ross. I don't mean to suggest--I don't think you are 
putting your district in front of your national 
responsibilities, Mr. Chairman. I would respectfully suggest 
that the reason the framers devised a House of Representatives 
of people from districts is so that they would have people from 
different areas and different perspectives who would bring the 
perspectives of their districts to bear on the national 
interest.
    That is the Madisonian genius, I would suggest, Mr. 
Chairman. But it is also one of the reasons why we have an 
executive branch as well. But I am sorry to have digressed into 
an area that you have greater expertise than me.
    The point is I think--and----
    Mr. Conyers. But what about what they said about your 
thinking on the subject matter for which we are gathered today?
    Mr. Ross. Mr. Chairman, I do not believe, without regard to 
the particular facts of this case, which I have tried to say I 
don't have an opinion on. In general, when you think about the 
move of the Montreal Expos to Washington and how that was held 
up by the veto of the Baltimore Orioles, when you think about 
other franchise relocation issues, when you think about the 
Bulls litigation which I have detailed in my statement.
    I think there are a number of examples of where sports 
leagues have acted in the best interest of individual owners 
and have not behaved in the way that Mr. Daly would like sports 
league owners to behave when they sit around the table.
    Mr. Conyers. Well, let me ask you this. Did you hear what 
Mr. Gertzog said----
    Mr. Ross. Yes.
    Mr. Conyers [continuing]. When he responded to my question 
of helping you understand things from a different point of 
view? And is what you said to me your answer to him?
    Mr. Ross. I disagree with his factual characterization that 
the National Football League owners invariably act in the best 
interests of the league.
    I think there are many cases where the National Football 
League owners do not act in the best interest of the league and 
require leadership from the commissioner's office or others, 
which is sometimes successful and sometimes not.
    Mr. Conyers. Okay. Did you hear Mr. Daly make some--what he 
thinks as positive suggestions about your views on the subject 
matter that brings us here today?
    Mr. Ross. Yes, Mr. Chairman.
    Mr. Conyers. Do you have any response for him, or do you 
think that they were fairly accurate?
    Mr. Ross. Mr. Daly and I disagree about whether the 
frequency of owner behavior that is self-interested justifies 
having continuing antitrust treatment of sports league 
decisions.
    Mr. Conyers. So do you consider yourself far apart in your 
views from Mr. Gertzog and Mr. Daly, or are they relatively 
close?
    Mr. Ross. In terms of what is the subject of this hearing, 
which is the single entity status of sports leagues, I would 
say that my views are fairly far apart from Mr. Daly's and Mr. 
Gertzog's.
    Mr. Conyers. Well, let me turn to Lamar Smith, the Ranking 
Member, to----
    Mr. Smith. Thank you, Mr----
    Mr. Conyers [continuing]. See if he can throw some light on 
this.
    Mr. Smith. Thank you, Mr. Chairman. I do have a couple of 
questions. But let me also confess at the outset that my only 
connection to professional sports, which isn't necessarily bad, 
is--and I am proud of them--is the San Antonio Spurs, of 
course, and then I happen to represent the University of Texas, 
so the other professional athletes I would have to say are the 
front line of the University of Texas football team, or at 
least soon to be, probably.
    Mr. Ross, let me address my first question to you, and you 
have already responded in part to it, but it is this. In so 
many issues, particularly the ones we are facing today, the 
real question is where do you draw the line.
    And in the case of the National Football League, there are 
instances where it does act as a single entity--for example, in 
the schedule of games and in the setting of the rules of play 
and so forth.
    So obviously, there are instances where it acts as a single 
entity and other instances where it does not. Where would you 
draw the line beyond what you have already said?
    Mr. Ross. Yes, that is the position of the government, and 
it has some merit. I have to say, I don't think that there is a 
line there per se. I think that you might want to say that on 
an aspect-by-aspect basis, a plaintiff should have to show that 
the clubs are not acting in the best interests of the league.
    But let me give you a law professor example of rules. As 
you may know if you are a baseball fan, the strike zone 
basically got distorted by umpires and then got changed by 
Major League Baseball about 5 years ago.
    And the rule that got changed happened to favor the Atlanta 
Braves because they had great pitching. Now, I would argue that 
if the Braves' owner had gotten a minority of the fellow owners 
to block a change in the rules purely to favor their own self-
interest, and you could show some competitive harm--I don't 
know how you could about that, but you could show some 
competitive harm, then that might be something where single-
entity status should not be applied.
    So even in scheduling and rules, I would say that the focus 
ought to be is this a single economic driver or not. And in 
some cases, you are right, the league is operating as a single 
economic driver. In point of fact, the NHL and their labor 
dispute was completely united, and Mr. Daly and Mr. Bettman did 
a great job there.
    But in other cases, although he would prefer it not to be, 
quite frankly, Mr. Daly is not leading the single economic 
driver, but he is basically being dictated to by a committee of 
horses. And when that is happening, I think they are not a--
then the league is not a single entity.
    Mr. Smith. Okay. Thank you, Mr. Ross.
    Mr. Gertzog, a couple of questions for you. Some of the 
professional sports--I think soccer is one--constituted 
themselves as a single entity when they formed.
    Why didn't the NFL do the same thing? And in any case, why 
haven't they sort of reconstituted themselves as a single 
entity even if they didn't do it originally?
    Mr. Gertzog. Well, in terms of the NFL's structure, our 
league dates back many years prior to MLS, which I think is the 
league that you are referring to.
    We believe that there are many benefits----
    Mr. Smith. Major League Soccer, yes.
    Mr. Gertzog. Correct. We believe that there are many 
benefits to having local ownership. It helps make the league 
stronger. There is an identification in the marketplace with an 
owner and executives, and we think we have a very strong 
business model that has been proven out by how successful we 
have been.
    Mr. Smith. Okay. Quick answer, but a good answer.
    The second question is this. Going back to American Needle, 
as I recall many years ago before NFL gave Reebok the contract, 
American Needle was the licensee and, I think, the licensee for 
all 30 teams.
    And it sort of looks like they are complaining now because 
they didn't get the contract, even though they themselves were 
in a very similar favorable position years ago. Do you have any 
comment on that?
    Mr. Gertzog. Yes. It is ironic that they are complaining 
about the very structure that they benefitted from for two 
decades.
    Mr. Smith. Right.
    Mr. Gertzog. They are also, as I understand it, currently a 
licensee of Major League Baseball, which has a very similar 
structure to NFL Properties, where they have a license 
agreement for all 32 teams.
    What they didn't like is the nature of being a licensee in 
professional sports and entertainment, or any other field, is 
you bid for licenses. You are granted rights for a period of 
time, and then when those licenses expire, you have to re-bid. 
They re-bid. The NFL made a different decision. And after two 
decades of being an NFL licensee, they sued us because they 
didn't----
    Mr. Smith. So is this----
    Mr. Gertzog [continuing]. Like the decision.
    Mr. Smith [continuing]. A case of what is good for the 
goose is good for the gander, or is it a case of what is good 
for the goose one time should be just as well for the goose 
another time?
    Mr. Gertzog. I like your goose analogy better than the 
professor's. [Laughter.]
    Mr. Smith. Okay. Thank you, Mr. Gertzog.
    Thank you, Mr. Chairman. I don't have any other questions.
    Mr. Conyers. Mr. Mawae, do you want the last response 
before we adjourn?
    Oh, wait a minute. I didn't see you come back in. Wait a 
minute. Well, I will yield to you now before I yield to the 
gentlelady from Texas.
    Mr. Mawae. You will let me--my comments on this? You know, 
I can't sit here and speak from a legal standpoint with legal 
lexicon. I don't know contracts. I am not an educated 
professor. But I am a pretty smart football player, and I know 
the business of football.
    And what I do know and what American Needle represents to 
us is a possibility that the NFL could be recognized as one 
single entity, in which term would give them the power to 
oversee every aspect of the game, including what happens with 
the players.
    As a player, I have been on the free agent market three 
times. I have benefitted by the broadcasting act because in 
1998 the NFL signed a new agreement with the broadcasters for 
$17 billion.
    I hit the free agent market that year and became the 
highest-paid center in the history of the league. So in that 
sense, I benefitted from the NFL and the deals that they have 
struck.
    But the issue goes further than that, that in the case--or 
in the event that the NFL gets recognized as a single entity, 
then they control player markets. They control player salaries 
and player movement.
    It would not be beneficial to the players for the owners to 
take--say and dictate which teams that each player should go 
to, dictate the cost of ticket sales, which drives up the 
revenue, and things like that.
    It is a free agent market for the owners. It is a free 
agent market for the players. And it is a free agent market for 
the NFL, because they compete against all the other major 
league sports.
    As it pertains to the players in general, we are concerned 
because we have fought so hard over the years to have labor 
peace. That has been protected through the antitrust 
legislation and has not allowed them full exemption.
    And we are concerned, especially in this decade or this era 
of our organization, that if the NFL does, indeed, get what 
they want out of this American Needle case that we could lose 
much of what we have fought for over the course of these last 
30 or 40 years.
    That is my statement. I am here to represent the 1,900 
guys. And, sir, I just appreciate your time and just for me to 
give my very quick and brief opinion. Thank you.
    Mr. Conyers. Thank you.
    Mr. Gertzog, is there anything that you could leave the 
head of the football players association with that would make 
him feel more comfortable this evening as he reflects on what 
we did here?
    Mr. Gertzog. I appreciate the promotion to commissioner, 
but I am just a mere senior vice president of the National 
Football League. But in any event, in terms of that question, 
as I said earlier, the NFL owners are firmly committed to 
reaching a new deal through the collective bargaining process.
    As Mr. Mawae knows, there was a negotiation session 
yesterday. There have been 11 of these sessions over the past 
few months. And everyone is firmly committed to trying to reach 
a new deal. A work stoppage does not benefit anyone. It does 
not benefit the owners. It does not benefit players.
    We have got a good thing going. We want to continue it. We 
have just got to find some common ground. And the way to do 
that is at the negotiation table, not at a courtroom.
    Mr. Conyers. You think that is going to make him rest more 
comfortably this evening?
    Mr. Gertzog. I hope so.
    Mr. Conyers. I do, too.
    Well, are you? I said well, are you going to be more 
comfortable now that you have had his response to my question.
    Mr. Mawae. No, sir, we will not be more comfortable.
    Mr. Conyers. You won't be more comfortable. Well, I will 
turn this over to Congresswoman Sheila Jackson Lee. Maybe she 
can help us feel better about this.
    Ms. Jackson Lee. Thank you very much, Mr. Chairman.
    Let me ask Mr. Daly, are you a nonprofit, the NHL?
    Mr. Daly. The league itself is a not-for-profit 
association, that is correct.
    Ms. Jackson Lee. Not-for-profit. Is that a 501(c)(3), or 
what is the configuration?
    Mr. Daly. I probably----
    Voice. Six.
    Mr. Daly.--I should know the answer to that question.
    Voice. Six.
    Ms. Jackson Lee. 501(c)(6)?
    Mr. Daly. Thank you, Joe.
    Ms. Jackson Lee. Okay.
    And, Mr. Gertzog, what is the NFL?
    Mr. Gertzog. It is similar. It is an unincorporated 
association not-for-profit, and--but the league has a number of 
for-profit business units.
    NFL Ventures L.P. houses our commercial operations, which 
would include broadcasting, NFL Properties licensed products, 
our international business and our Internet and satellite 
business.
    Ms. Jackson Lee. What is the name of it that houses it?
    Mr. Gertzog. NFL Ventures L.P.
    Ms. Jackson Lee. And I assume the value of that is public. 
What is the approximate value of the NFL Ventures L.P.?
    Mr. Gertzog. It is not public.
    Ms. Jackson Lee. Those numbers are not public?
    Mr. Gertzog. No.
    Ms. Jackson Lee. I thought it was for profit.
    Mr. Gertzog. It is for profit.
    Ms. Jackson Lee. So is it public on your tax returns?
    Mr. Gertzog. It is a private corporation.
    Ms. Jackson Lee. It is a private corporation, so in 
essence----
    Mr. Gertzog. Owned by the members of the National Football 
League.
    Ms. Jackson Lee. So in essence, you still have a certain 
degree of protection, so the public cannot access what the NFL 
Ventures L.P. profits are. Is that correct?
    Mr. Gertzog. Not to my knowledge.
    Ms. Jackson Lee. All right. And the----
    Mr. Gertzog. One of our teams, the Packers, is a public 
team, and you can track through their public filings some of 
the revenue streams that come from NFL Ventures.
    Ms. Jackson Lee. The NFL, then, is a 501(c)--the one that 
is a not-for-profit--what is that, 501(c) what?
    Mr. Gertzog. I think it is six, but I would have to check 
on that for you.
    Ms. Jackson Lee. And your guess would be that the NHL would 
be a six as well? Is that my understanding?
    Mr. Gertzog. Yes.
    Ms. Jackson Lee. Okay. Let me try to give the approach that 
I would like to take. And I thank you gentlemen for being here.
    And I thank you, Professor. I am getting ready to come and 
put you either in the hot seat or the cold seat.
    First, I would like to thank the Chairman for this hearing 
and thank Chairman Johnson for this hearing and just remind the 
NFL that in another hearing in another Subcommittee where our 
Chairman Bobby Scott had passed out of Committee the Promise 
Act, we were able to include language in the bill that spoke 
about the NHL, the MLB, the NBA and the NFL engaging in 
antiviolence activities that are somewhat different from 
antiviolence not of the players, of course, on the field--let 
me characterize it correctly--working with our youth.
    And many times you always say we do those kinds of 
programs. This is somewhat different, because I found that in 
the NHL and others who have a certain persona of a lot of 
activity on the field, a lot of blustering, and may even have 
some persona of some missteps publicly that the media will 
highlight on, all the other guys that have been playing year 
after year that are individuals that young people should see--
hard-working individuals who serve their community and many 
times don't get the glare of the media, except for maybe when 
they are on the playing field.
    So we wanted to give them an opportunity to be mentors. I 
say that to say that I think the players are valuable. And I 
compare it to a situation of a teeming stadium. The big one in 
Texas, of course, is up north, so we are very proud of the 
Reliance Stadium in Houston. This, of course, is the NFL. We 
are proud of our--all of our teams.
    But we would have this teeming team, the big stadium in 
Texas up north, and then the great stadium in Houston, the 
Reliance Stadium for the Houston Texans. And it would be 
teeming with excitement and noise, and we are all sitting there 
with bated breath, and nobody comes on the field.
    A politician may go out and ask people to vote. Somebody 
else may come out and do a dance or two. It might even be a 
major entertainer that will sing the Star-Spangled Banner. But 
there are no players, absolutely no players. Do we have 
anything?
    Are we going to have a audience sitting there smiling and 
say, ``I am so excited to be here today, I am just going to sit 
here in silence watching an empty field?'' That is what this 
antitrust exemption represents to me.
    It is a question of whether or not the valuable aspect of 
this game, the people who play every day, whether it is the NHL 
players, the NFL players, are going to be hindered because of 
the approach that is being taken and the seemingly impenetrable 
exemption that the leagues happen to have.
    Mr. Mawae, if I have it correct, let me just ask you, do 
you expect a lockout in 2011?
    Mr. Mawae. Ma'am, we are fully anticipating a lockout, and 
we are preparing all 1,900 of our players to do so. We have 
done them--we have educated them in terms of saving 
financially, on what to do in case there is a lockout and 
things like that.
    Obviously, we don't want that to happen. We have been to 
the table a number of times. But right this moment, we are 
anticipating that, because that is all the indications are 
showing, that that is where we are headed.
    Ms. Jackson Lee. And tell me, what--and thank you for 
qualifying that you do not represent yourself as a person 
providing legal advice, counsel or information, but you are a 
player, and you do--you are the president.
    So let me try to ask this question. What is a lockout? And 
what gives the league the authority to lock you out?
    Mr. Mawae. Over the history of our league, the work 
stoppages that we face have been strikes by players where we 
have refused to go to work. This is not the case. We are not 
fighting for anything. We are not wanting anything extra. We 
don't want another percentage point.
    We like the system the way it is, and we think it works 
well for both sides. A lockout would be a sense where the 
owners are not willing to participate in the collective 
bargaining agreement that we have at place.
    They have already opted out of our dill 2 years in advance, 
which would make us go into a season of uncertainty prior to 
the 2011 season. Players would be ready to come to training 
camp with the gates locked and the locker rooms shut and us not 
having a place to go to work.
    That is what a lockout is. That is the way our players 
understand it.
    Ms. Jackson Lee. And with the entity being a ``single 
entity,'' which is what will be affirmed possibly if the Needle 
case, the American Needle case, goes up on appeal, which is, in 
actuality, the league's desire to reaffirm the lower court's 
decision--they already won, as I understand it, but they want 
to put it in blood.
    But as a single entity, that means that you are--if you are 
a player, couldn't skip over to Green Bay if you are playing 
for the Saints. You would be locked out.
    Mr. Mawae. I would be locked out because all----
    Ms. Jackson Lee. You would have no movement to say, ``Okay, 
I am going to go to----''
    Mr. Mawae [continuing]. All 32 teams' doors would be shut.
    Ms. Jackson Lee. ``--the Giants and take my chances.'' 
Pardon me?
    Mr. Mawae. All 32 teams would be shut.
    Ms. Jackson Lee. All 32 teams----
    Mr. Mawae. And there is no comparable league.
    Ms. Jackson Lee [continuing]. Would shut down on workers, 
and workers could not go onto the field to work.
    Mr. Mawae. Yes, ma'am.
    Ms. Jackson Lee. Is that my understanding?
    Mr. Mawae. Yes, ma'am.
    Ms. Jackson Lee. Professor Ross, with the American Needle 
case--and I think Mr. Gertzog made an eloquent case that 
American Needle had a relationship for 20 years, and I am sure 
they were celebrating that relationship. And so one could argue 
you had yours for a period of time, and it is time to say 
goodbye.
    I take a different perspective as to whether their single 
relationship was healthy. If we speak about jobs, apparently 
American Needle is fighting for their life. They apparently 
have a number of employees, or had some employees, who are 
gainfully employed, providing for their families.
    And in this context, America is looking to hire people and 
to lower the unemployment and raise the employment. What impact 
and what configuration could we actually substitute for this 
antitrust exemption which would balance the business interests 
of the NFL--which are, by the way, protected enormously with 
the private entity and the 501(c)(6), if that is accurate--to 
ensure that the product is a quality product but that there is 
diversity in the opportunities for businesses to do business 
with the NFL?
    Maybe it would not be American Needle. I am not here to 
argue their case. But maybe it would be American Johnson, 
American Red White & Blue, that could stand alongside Reebok, 
provide the opportunity for good quality, decent prices and 
maybe even better prices for the consumer, and a little bit of 
competition among the distributors.
    Is that too confusing a concept?
    Mr. Ross. Congresswoman, it is not too confusing a concept. 
I think we don't know enough because of this single entity 
decision by the district court and the Court of Appeals to know 
what the real facts are.
    Now, if you listen to Mr. Gertzog's testimony, the answer 
is that the efficient result is to give the business 
exclusively to Reebok, they can do a better job, hire more 
workers, produce a better-quality product that will appeal to 
consumers, and because, after all, what they are really doing 
is they are selling NFL hats in competition with other 
merchandise, and the idea is you--if the Redskins hat gets too 
pricey, somebody is going to buy a Washington Capitals hat--
makes Mr. Daly happy, and Mr. Gertzog unhappy.
    And if that would----
    Ms. Jackson Lee. Or off-brand somewhere.
    Mr. Ross. Or off-brand. And if that is what is going on, 
what the antitrust laws say is that is fine. Now, if this 
Committee wants to deal with the important social issues you 
raise about diversity in various forms of industries, that is a 
separate question that certainly would warrant the attention of 
the Committee.
    But that is not what the antitrust laws look at. The 
antitrust laws----
    Ms. Jackson Lee. Oh, I am fully aware of that, but I am 
looking at the impact. But then characterizing--I am fully 
aware of your argument, but then what is the value of the 
antitrust exemption when it reaches into the quality of life 
and the ability for Mr. Mawae to be compensated appropriately 
for his work?
    Mr. Ross. Well, the particular issue as it arises in labor 
is relatively narrow but can be potentially important. The 
effect of the exemption would not change the current collective 
bargaining relationship between the NFL Management Council and 
the NFL Players Association.
    What an American Needle victory would do--a big victory 
would do--would be to take away an option that the NFL players 
were able to exercise in the 1990's, which is in the face of a 
labor impasse, they could decertify as a union and then 
continue to offer to play and have the issue decided by the 
courts while the season was going on.
    So to go back to the sort of battle days of labor strike 
and the NFL--and during the 1980's we had a couple of strikes. 
We had some work stoppages.
    Ms. Jackson Lee. Absolutely.
    Mr. Ross. And then in the 1990's, the NFL players kept 
playing the whole time that case was being litigated. Fans 
continued to enjoy NFL football. And then there was antitrust 
litigation. That option, the decertify and sue option, would be 
precluded if the Supreme Court's decision is a very broad 
decision.
    Now, if the Supreme Court's decision is as narrow as Mr. 
Gertzog now says he wants it to be, only deciding what--the 
impact on licensing issues, then that issue would not arise and 
you wouldn't necessarily have that difficulty.
    And if the players think that they are--and this would only 
be a last resort for the players, because I am sure that the 
NFL players would prefer to reach an agreement through 
collective bargaining and stay organized as a union under the 
National Labor Relations Act, as opposed to simply becoming a 
trade association, as they did for a brief period in the 
1990's.
    I note, for example, in hockey, during the NHL lockout the 
players did not choose to decertify but continued to use 
their--well, they didn't do it too well, but continued to fight 
the issues under the labor law.
    So even having that option isn't necessarily one that would 
prevent a strike or a lockout. But it would at least give the 
union the option of continuing to play and taking it to the 
courts if that was the option that they chose to pursue.
    Ms. Jackson Lee. Well, my understanding is what the unions 
have gained are the ability to--I think it is a 51--or 60-40 
breakdown of the revenue. Is that accurate? And that part of 
this ongoing negotiation is to break that and have the owners 
go up and you go down.
    Mr. Mawae. Well, initially, on the surface of it, it looks 
like a 60-40 percent in the total revenue, but we know now that 
it is more of a 54 percent to the players because of cost 
credits already given off the top before you take into account 
the percentage that we split between the----
    Ms. Jackson Lee. So are you happy with that?
    Mr. Mawae. No, ma'am.
    Ms. Jackson Lee. You think it should get----
    Mr. Mawae. Well, I am sorry about that. We are happy with 
where we are at right now.
    Ms. Jackson Lee. Right, that is what I am trying to 
understand.
    Mr. Mawae. We are being asked to give a 20 percent rollback 
on player salaries without proof that they have lost 20 percent 
in revenue.
    Ms. Jackson Lee. Okay.
    Mr. Ross, does that come about with the antitrust 
exemption?
    Mr. Ross. The antitrust exemption only comes into play in 
real life if the leagues and the union are at such an impasse 
that the players decide to exercise their option to stop being 
a union and take their chances in court.
    As long as there is any opportunity for the deal to be 
worked out--and there was a whole series of failures in the of 
the NFLPA to get the owners to move at all on free agency, 
which was a huge psychological, I think, threshold, until their 
successful McNeil litigation.
    But the current dispute is really one of labor law 
between--law and then the economics and fairness of whatever 
the two respective positions are going to be on whether the 
current thing works, whether the players ought to have give-
backs or something.
    That is really not an antitrust decision until and unless 
the players feel that their prospects are so poor that we need 
to take this out of collective bargaining and end the 
collective bargaining relationship.
    Ms. Jackson Lee. Well, I would like to be an optimist, but 
I think the antitrust exemption may come into being because 
every player that I have informally polled believes that a 
lockout is looming and that the option that they have to 
decertify, which would be thwarted by the antitrust exemption, 
is crucial.
    And I would be interested in understanding how Mr. Gertzog 
believes--I guess his appeal is going to be narrowly drawn.
    But how are you going to dictate what the Supreme Court may 
rule? And the Supreme Court may give a broad ruling which, in 
essence, would, in essence, implode the rights that the players 
have by way of the antitrust exemption.
    Mr. Gertzog. Certainly we are not in a position to dictate 
the Supreme Court's ultimate decision, so I agree with you on 
that.
    It should be noted that there were 70 minutes of oral 
argument last Wednesday before the Supreme Court. There was not 
a single question by any of the justices regarding the impact 
on labor, and the sports unions from many different leagues had 
submitted amicus briefs on that point, pointing out some of 
what we will call the doomsday scenarios.
    And eight of the nine justices asked questions, many of 
them multiple questions--not a single question on that point. 
So we don't expect that a ruling in our favor will cover labor.
    Ms. Jackson Lee. Okay.
    Mr. Chairman, I will conclude with this question, I guess, 
to Mr. Ross.
    The idea of the 32 entities, which is partly labor law, 
acting, I will just say, as one--the question I posed to Mr. 
Mawae, which means that while they are locked out, they can't 
go anywhere else and offer their services.
    Sometimes the law intertwines, even though the antitrust 
distinctions you have made very clear. In and of itself, it 
appears that you are denying a person's worth and that the 
antitrust exemption gives less oversight as to whether or not 
there are any antitrust implications.
    I know you are speaking to labor law, but does that 
exemption not allow, then, to look at the actions that are 
going on on the labor side as being--as undermining any 
competitiveness? On the face, it does not seem that way, but 
maybe there is something.
    And my last point is the American Needle case--I am just 
seeing the whole crowd and cloud, and my question would be when 
you have these single entities like Reebok, could they not 
subcontract or joint venture with American Needle? Does that 
mean that small minority businesses need not knock on the door?
    To me, that is what it says. These single distribution--
that means if I am an African American business, or a small 
business or Hispanic business, I probably wouldn't even know 
where the front door of the NFL is, because they wouldn't be 
looking for me.
    Frankly, I think that is anticompetitive.
    Mr. Ross. Congresswoman, I would be remiss in not saying 
what a pleasure it is to talk to the whole Committee and 
particularly note my father-in-law and you both went to Jamaica 
High, so I am particularly pleased to answer your question in 
that regard.
    The antitrust laws are focused primarily on consumer 
choice. If, as Mr. Gertzog claims, the Reebok deal is good for 
consumers in a lower cost or more quality, then that is really 
only what the antitrust laws are concerned about.
    There are a lot of reasons for economic diversity. But I 
would use the example of the Federal Communications Act which 
separates the issues, so that there are competition law issues, 
say, in a merger, and then there are issues of minority access 
and diversity of viewpoints and things like that.
    Now, I think it is a serious public policy question whether 
sports leagues ought to be having exclusive contracts with 
single large multinational corporations, especially if there 
aren't some socially responsible deals with other enterprises 
and things like that.
    Ms. Jackson Lee. And especially if they don't look for 
them.
    Mr. Ross. And I think that is a fair question. But with all 
respect, I think that is a very useful topic for another 
hearing, because that is really not an antitrust question.
    That is really a question of social justice and the 
economic power that really doesn't impact on consumer.
    Ms. Jackson Lee. So just quickly, it does impact on 
consumers if they did not look to see whether or not smaller 
entities, non-multinationals, would provide a better deal.
    I am sure in their appeal they have made the argument, or 
the lower case they made the argument, that the better deal was 
with Reebok, but you made--Reebok, but you made the point. It 
is a multinational company and others are left outside the 
door.
    And because of the antitrust exemption, the NFL can do 
that.
    Mr. Ross. Actually, let me make one other clarification to 
that. If, in fact, the--sports was such a driver for 
merchandise as it is for television, for example, that small 
and minority business enterprises could not compete in the 
marketplace without getting a sports contract--I have no idea 
if that is true, but if that were true, then that would be an 
antitrust violation.
    But the single-entity status doesn't really matter there. 
The contract, the Section 1 agreement, that you would challenge 
if you were, say, a small minority business enterprises would 
be the agreement between the National Football League and 
Reebok.
    There is no question that that is still an agreement--or 
the National Hockey League and whoever you happen to have as 
your agreement.
    If, in fact, these sorts of agreements really do exclude 
small and medium apparel manufacturers and others from the 
marketplace, that is an antitrust question, and I think that is 
actually one that maybe the Federal Trade Commission or the 
Justice Department should take a look at.
    But that really is not affected by this--the American 
Needle case. Whether they are a single entity or a group of 
clubs, it is the agreement with Reebok that----
    Ms. Jackson Lee. Right.
    Mr. Ross [continuing]. You would be looking at, and that is 
a very legitimate question that you raise.
    Ms. Jackson Lee. Mr. Chairman, thank you. I think that this 
hearing, once again, is vital, as the hearings that you have 
taken leadership on, and we have joined you, on the NFL brain 
injuries, one to be held in Houston on February 1st, one held 
in Washington, one held in Detroit.
    I think it has made enormous difference. I had the chance 
to visit with some of my players--and when I say ``my,'' we 
take ownership and have great respect for you all--and the 
testimonies, not in front of a hearing, Mr. Chairman, but just 
personal testimonies, are just amazing.
    So I think we are doing good here, and I, frankly, believe 
the antitrust question has to be continuously explored. I don't 
know what the Supreme Court is going to do, but I have a sense 
the Supreme Court can do anything they want to do. They don't 
have to be narrowly defined.
    And I would add that with respect to the ongoing 
negotiations--but do include labor agreements--I understand 
that--but there is some oversight that Judiciary would have. We 
need to monitor this particular lockout potential, which we 
don't want, very closely, because the product of the player is 
what the sports fan comes to see.
    They don't want to see me singing or speaking. Great 
respect for all of the investors that invest into the sports, 
but not too many of them could draw attention on the field. And 
I don't know why, in the words of Rodney King, we can't all get 
along.
    And I certainly hope that we will have a steady watch of 
this. And even though my great professor has interpreted very 
well the requirements--or the stricture, rather, of the 
antitrust laws, I see a little creeping over. And I am going to 
be exploring that, doing research, to see how this unity of the 
32 is also impacting both antitrust and NLRB on the workers' 
rights.
    So I have sort of moved around in this issue, but I do 
think there is a way of trying to address this question and to 
get the facts and to juxtapose it against the law, and maybe do 
a little bit more research, Professor Ross.
    But I thank you, Mr. Chairman, and I thank Mr. Gertzog for 
his presentation.
    Mr. Daly, we have left you alone a little bit but hope you 
will participate in this antiviolence effort. We will get your 
card.
    And, Mr. Mawae, you need to keep us all apprised of these 
negotiations. Got some good Texans down there.
    I will acknowledge, Mr. Chairman, that you had a chance, as 
I understand, to meet one of our very fine Houston Texans, a 
Mr. Chester Pitt, who was here and was very impressed with your 
leadership. I think he might have been in a group meeting that 
you may have had with these players.
    And I want you to know that they are fine civic citizens, 
and we really do appreciate what they do for our communities.
    I thank you, Mr. Chairman, and I yield back.
    Mr. Conyers. Thank you all very, very much. This was a very 
instructive and beneficial hearing.
    The Subcommittee stands adjourned.
    [Whereupon, at 4:42 p.m., the Subcommittee was adjourned.]

                                 
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