New York Rangers File Antitrust Lawsuit Against NHL

On September 28, Madison Square Garden, L.P., the parent company of the New York Rangers, filed a 35-page antitrust complaint against the National Hockey League ("NHL"), alleging that the NHL illegally restrained trade in various North American markets in violation of Section 1 of the Sherman Act and Section 340 of New York's General Business Law.

The purported anticompetitive conduct cited by Madison Square Garden includes allegations that the NHL teams imposed a series of rules limiting individual team control over their websites, marks, licensing rights, merchandising rights, dashboard sales, and broadcast rights. The complaint further alleges that, "by seeking to control the competitive activities of independent business in ways that are not necessary to the functioning of the [NHL] joint venture, the NHL has become an illegal cartel," and that such "broad collective control over the competitive activities of the independent [hockey] business is inconsistent with federal and New York state antitrust laws."

Based on my reading of this complaint, it seems the lawsuit (although addressing various issues) emerges primarily based on MSG's dislike for a new NHL policy that requires all thirty pro hockey teams to turn over control of their websites to the NHL, and which intends to impose a $100,000 per-day fine on any noncomplying teams. According to the complaint, the Rangers had already invested substantial effort into developing their independent website, http://www.nyrangers.com/, which MSG believes provides the Rangers with a competitive advantage in its ability to sell Rangers merchandise and to broadcast Rangers games throughout cyberspace. Without control over its website and marks, MSG believes that the Rangers will lose some of this competitive advantage.

While it is too early to assess the antitrust merits of this suit, MSG's decision to litigate over these important issues represents a drastic change of approach, as in recent years large-market teams have been reluctant to litigate against sports leagues' attempts to centrally control property rights. This suit is especially interesting in that it seeks to reverse what is now more than a 40-year trend of sports leagues expanding the allocation of property rights at the league level.

Although MSG has attempted to limit its complaint to the challenge of a narrow range of collectivized rights -- even conceding that "legitimate activities [for the NHL] include ... negotiating television broadcast arrangements" -- if MSG were to win this lawsuit, the resulting opinion conceivably could establish precedent that seriously limits the rights of any sports league to collectivize any property right where even a single team were to desire to opt out. In doing so, such an opinion could call into doubt non-unanimous league votes in favor of not only allocating broadcast and merchandising rights, but also effectuating revenue sharing. For that reason, I strongly suspect this case will settle before the court publishes an opinion.

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Other points of note: The law firm Jones Day is representing Madison Square Garden in this lawsuit. Although it has not been announced, presumably Skadden Arps (one of my former employers and long-time antitrust counsel to the NHL) will represent the NHL. Judge Loretta A. Preska of the Southern District of New York is named as the presiding judge.

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