Newsletter, Spring 2016
Message from the Chair
The Newsletter of the Trade,Sports & Professional
Associations Committee
Editors: Gary W. Kubek
Mark Katz
Welcome back to another edition of Ass’n, the Newsletter of
the ABA Section of Antitrust Law’s Trade, Sports and Professional
Associations Committee. As we approach this year’s Section Spring
Meeting, we are happy to bring you a set of insightful updates on
antitrust developments in the association world, and to invite you
to participate in the ongoing discussion that is the work of our
Committee.
2015 and the beginning of 2016 saw a vibrant extension of the
highly active litigation and enforcement climate we saw beginning
in 2014. This edition of Ass’n includes insights into a number of
these developments.
This edition includes terric commentary on the StubHub antitrust
suit by Schiff Hardin’s Matthew Kennison, an interesting analysis of
the implications of O’Bannon for antitrust issues in standard-setting
activities by Timothy Bergin at Potomac Law Group, and a look into
state attorney general work in New York on ticket selling practices,
by Justin Cohen of Wilson Sonsini. Our material comes directly
from our members, and we are, as always, happy to talk with any
of you about ideas you have for pieces to be included in the next
issue of Ass’n.
We hope that, after you read our commentary in the newsletter,
you will check out the active programming and updates the
Committee has to offer. We have worked hard to stock our
busy schedule of panels and brown bags with practical, usable
guidance and insights, and to offer Section members engaging, free
programming that adds to your ability to counsel clients.
We have continued our focus on sports law, with successful
programming on developments following American Needle, and on
antitrust and consumer protection litigation in the ultimate ghting,
rodeo, golf caddy, and fantasy sports area. We have also convened
several panels offering special content on the antitrust issues faced
by different types of non-sports trade associations, including a panel
focused on the needs of in-house trade association counsel and
a panel on challenges for tech industry associations. Finally, we
have internationalized our offerings, through discussions on trade
association antitrust issues outside the U.S. and the addition of
Canadian and other perspectives to other topical panels.
Inside this issue...
Message from the Chair ...........................................................1
Court Rejects StubHub’s Antitrust Suit Against Golden
State Warriors and Ticketmaster
............................................2
Implications of O’Bannon v. NCAA for
Joint Standard-Setting .............................................................4
New York Attorney General Investigating Ticket Sale
Practices of Sports and Entertainment Companies ...........8
Ryan C. Tisch, Chair
Trade, Sports, and Professional
Associations Committee
Antitrust Section
American Bar Association
Crowell Moring
202-624-2674
Spring 2016
2
2
The Committee will be sponsoring the Spring Meeting session
“Play Ball: What Rules are Reasonable?” focusing on developments
in the NCAA and other sports-related cases, and the panel will be
moderated by our Vice Chair Gary Kubek. We hope you will join
us for that session on Wednesday, April 6th, at 3:30pm.
We have also continued our effort to ensure that the Committee’s
space on the Section’s CONNECT platform is stocked with timely
and interesting updates from the association world. We would
encourage you to check out the CONNECT page, and to join the
Committee while you’re at it. In addition to our written material,
the CONNECT page is a great place to nd out about upcoming
programming, interact with others in the Committee, and nd
recordings of previous programs.
We hope you enjoy this edition of Ass’n, and I welcome you to
take part in the life of our Committee. Reach out to me or to any of
our Committee Vice Chairs or our YLR to nd out how you can get
involved. We look forward to hearing from you!
Trade, Sports & Professional Associations
Committee Leadership
Ryan C. Tisch, Chair
Crowell & Moring LLP
Robert L. Hubbard, Vice Chair
Ofce of the N.Y. Attorney General
Mark Katz, Vice Chair
Davies Ward Phillips & Vineberg LLP
mkatz@dwpv.com
Gary W. Kubek, Vice Chair
Debevoise & Plimpton LLP
Creighton James Macy, Vice Chair
Wilson Sonsini Goodrich & Rosati PC
cmacy@wsgr.com
Kimberly L. Scott, Vice Chair
Miller Caneld
scott@millercaneld.com
Gail Slater, Vice Chair
The Internet Association
Denes Rothschild, Young Lawyer Representative
Borden Ladner Gervais LLP
Court Rejects StubHub’s Antitrust Suit
Against Golden State Warriors and
Ticketmaster
Matthew P. Kennison
1
On March 29, 2015, StubHub sued Ticketmaster and the
Golden State Warriors in federal court in San Francisco.
StubHub, Inc. v. Golden State Warriors, LLC, No. C 15-1436 MMC.
StubHub alleged violations of both U.S. and California antitrust
laws. While the allegations related to several activities specic
to the two defendants, the complaint also described contractual
provisions in place between Ticketmaster and most other NFL,
NHL and NBA teams.
StubHub alleged that the challenged arrangements involved two
separate markets, the Primary Ticket Platform and the Secondary
Ticket Exchange. StubHub dened a Primary Ticket Platform as
the distribution and support services for the rst sale of tickets at
face value by the team to fans on a season ticket or individual game
basis. Secondary Ticket Exchanges were dened to be network
distribution and support service for ticket resales by the original
purchaser of the tickets. The complaint cited support for these
market denitions in their use by both the Department of Justice
and the Federal Trade Commission in earlier, unrelated antitrust
actions against Ticketmaster.
According to the original complaint, Ticketmaster “has exclusive,
league-wide deals with the NBA, NFL, and NHL for both Primary
Ticket Platform and Secondary Ticket Exchange services.”
StubHub alleged specically that “Warriors’ fans cannot purchase
primary tickets to Warriors regular season or playoff games without
conducting the transaction through Ticketmaster.” The complaint
also alleged that Ticketmaster is the only provider of Primary Ticket
Platform services for 25 other NBA teams, 25 NHL teams and all
32 NFL teams.
The complaint further alleged that the Warriors forced all season
ticket holders to agree to the following provision in its standard
terms and conditions:
“Sale or resale of any [Warriors] tickets by unauthorized means
is prohibited . . . . Authorized resale of your tickets via online
means is limited to [Ticketmaster’s] NBAtickets.com.”
The Warriors allegedly enforced this provision by threatening
to refuse to sell future playoff or subsequent season tickets to
1
Matthew Kennison is an associate at Schiff Hardin LLP in Ann Arbor, Michigan.
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their season ticket holders who did not comply; monitoring the
resale of season tickets on StubHub and elsewhere; allowing only
Ticketmaster’s Secondary Ticket Exchange to integrate technically
with Ticketmaster’s Primary Ticket Platform; and making allegedly
misleading public statements regarding the security of non-
Ticketmaster Secondary Ticket Exchanges while designating the
Ticketmaster exchange as the only “ofcial” one.
StubHub argued that Ticketmaster had market power, indeed
“long-standing dominance,” in Primary Ticket Platform markets.
Again, the complaint relied on, among other things, prior ndings
to that effect by the federal antitrust authorities. The complaint
also alleged that the Warriors, who are the only source for Primary
Tickets, “wield substantial market power” over tickets to Warriors
games through the Primary Ticket Platform. The complaint argued
that the Primary Ticket Platform is a relevant market because, for
Warrior fans, tickets to other entertainment events, including other
NBA games, are not substitutes. Finally, the complaint alleged harm
to competition, ultimate consumers and StubHub itself.
Given these factual allegations, StubHub asserted six claims
for relief:
1. Illegal tying under Sherman Act Section 1. The alleged
tying product was Warriors tickets sold over the Primary
Ticket Platform and the allegedly tied product was
Secondary Ticket Exchange services for those Warriors
tickets. The complaint alleged that the Warriors and
Ticketmaster used their power in the tying product to
coerce purchases of the tied product through the onerous
resale ticket terms and conditions. In addition to those
elements of a per se tying claim, the complaint alleged a
rule of reason tying claim as well.
2. Other violations of Sherman Act Section 1. StubHub
alleged that a series of agreements between and actions
by the defendants resulted in diminished competition
and price increases in the market for Secondary Ticket
Exchange services for Warriors tickets. This claim alleged
both per se and rule of reason violations.
3. Conspiracy to monopolize the market for Secondary
Ticket Exchange services for Warrior tickets in
violation of Sherman Act Section 2. This claim made the
same allegations of conspiracy and overt acts as described
above. In addition, this claim alleged that the defendants
had the specic intent to monopolize that market.
4. Violation of the Cartwright Act, California’s antitrust law.
This claim essentially repeated the allegations of
Claims 2 and 3.
5. Violation of California’s Unfair Competition Law
Section 17200. This claim re-alleged several of the
specific acts by the defendants alleged earlier that
foreclose the Secondary Ticket Exchange services market
to StubHub and constituted unfair business practices.
6. Tortious interference with prospective economic
advantage. Because of the various actions of the
defendants, such as delay in delivery of the original tickets
or delivery in non-transferable paperless format, StubHub
argued that defendants had made it prohibitively difcult
to compete in the Secondary Ticket Exchange market.
The Warriors and Ticketmaster led separate motions to dismiss
StubHub’s original complaint. Each defendant argued that StubHub
improperly dened the relevant market as including only Warriors
tickets. Defendants argued that such “single-brand” markets are
highly disfavored in antitrust law, and that the failure to include all
reasonable substitutes for Warriors tickets made the alleged market
insufcient as a matter of law.
On June 30, 2015, StubHub responded by filing its First
Amended Complaint. Although much of the Amended Complaint
remained unchanged, StubHub added an “Industry Background”
section in which it attempted to address these market denition
shortcomings. StubHub alleged that Warriors tickets had no
economic substitutes because they were the only tickets that
provided entry to professional basketball games that take place in
the Bay Area, that there was virtually no cross-elasticity of demand
between Warriors tickets and tickets to other entertainment events,
and that this lack of substitutability was reected by the fact that
defendants had been able to increase ticket prices by more than
a small, but signicant, non-transitory amount (estimated at 30%)
over the last two seasons.
Ticketmaster and the Warriors each moved to dismiss the First
Amended Complaint, arguing that StubHub’s attempt to bolster
its relevant market allegations were still legally insufcient, as it
inescapably resulted in a single-product relevant market. The
defendants asserted that consumer preference alone, even when
characterized by intense customer loyalty, cannot create a separate
market, and thus the Amended Complaint must be dismissed.
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4
Implications Of O’Bannon v. NCAA for
Joint Standard-Setting
Timothy W. Bergin
1
In O’Bannon v. NCAA, 802 F.3d 1049 (2015), the Ninth Circuit
held that the National Collegiate Athletic Association (NCAA), as a
joint venture among its competing members, did not violate federal
antitrust law by limiting remuneration of students for participating
in intercollegiate athletics to the full cost of a college education.
1
Timothy W. Bergin is a partner at Potomac Law Group, PLLC in Washington, D.C.
The court thus reversed a ruling below requiring that the NCAA
further allow deferred payment (up to $5000) to college athletes
for related commercial use of their names, images and likenesses.
While O’Bannon is undoubtedly a “momentous case” for
intercollegiate athletics (id. at 1052), it is also instructive regarding
antitrust treatment of joint ventures generally, and standard-setting
organizations in particular.
A joint venture, like a cartel, is typically a collaboration among
actual or potential competitors, but unlike a price-xing cartel, which
is subject to per se antitrust liability, a joint venture may pass muster
under the antitrust rule of reason even if it retrains price competition
among its members. A joint venture is distinguished from a cartel
to the extent that a joint venture fosters procompetitive efciency
through substantial integration of its members’ economic activity,
such as joint purchasing, production, or marketing, or joint research,
standard-setting, or licensing. Under the antitrust rule of reason,
procompetitive benets may justify any restraints on competition
among joint venturers that are reasonably necessary to achieve
such benets. Courts are more likely to nd such justication to the
extent the joint venture itself faces competition and thus lacks market
power (power to maintain non-competitive pricing, by restraining
output or purchasing).
Irrespective of market power, a joint venture may incur antitrust
liability under the “quick-look” rule of reason if any restraint on price
competition among its members is not reasonably necessary to
achieve procompetitive ends. Thus, in NCAA v. Board of Regents
of University of Oklahoma, 468 US 85 (1983), while characterizing
the NCAA as a procompetitive joint venture generally, the Supreme
Court condemned under the antitrust rule of reason, for lack of
substantial procompetitive justication, NCAA rules restricting the
number of televised college football games (reducing output of a
joint product) and xing the price charged to television networks
(under contracts otherwise negotiated by colleges individually).
By contrast, the Ninth Circuit held in O’Bannon that the NCAA did
provide substantial procompetitive justication for its “price-xing”
rule restricting remuneration of college athletes. The court agreed
that the rule was reasonably necessary to preserve the tradition of
”amateurism” as an essential component of each joint “product” –
comprised of intercollegiate athletics – marketed by NCAA-member
colleges, adding to its public appeal and differentiating it from
professional sports. The court rejected the claim that the rule was
overly broad, rendered unreasonable by a less restrictive alternative
(paying college athletes only a modest sum, and only after they leave
college), because the alternative was not “‘virtually as effective’” as
Ticketmaster thereafter supplemented its submission with a
“Statement of Recent Decision,” citing Right Field Rooftops, LLC v.
Chicago Cubs Baseball Club LLC, No. 15 C 551, 2015 WL 5731736
(N.D. Ill. Sept. 30, 2015). In that case, the Northern District of
Illinois dismissed monopolization claims against the Chicago
Cubs because plaintiffs had failed to plead a plausible relevant
market. Citing to its April 2015 decision on a motion for
preliminary injunction, the district court held that arguments of
consumer preferences fall short of rendering it plausible that
there exist no interchangeable substitutes for live Cubs games.
See Right Field Rooftops, LLC v. Chicago Baseball Holdings, LLC,
87 F. Supp. 3d 874, 887 (N.D. Ill. 2015) (“While the Court accepts
that there are some die-hard Cubs fans that would never attend a
White Sox game, that does not mean that Cubs games constitute
their own market.”).
On November 5, 2015, Judge Chesney decided the motions in
the StubHub case without argument, dismissing all claims on two
separate grounds. Stubhub, Inc. v. Golden State Warriors, LLC,
No. C 15-1436 MMC, 2015 WL 6755594 (N.D. Cal. Nov. 5, 2015).
First, she held that StubHub’s proposed product markets were not
cognizable as a matter of law, nding that the alleged “primary”
and “secondary” ticket markets were in fact one market, as a “price
differential does not sufce to support the existence of two separate
markets, since ‘the scope of the relevant market is not governed by
the presence of a price differential between competing products.’”
Id. at 6. Judge Chesney also found that StubHub’s complaint failed
for the additional reason that StubHub had improperly dened the
market as containing only Warriors tickets. Since a producer has a
“natural monopoly” over the production and sale of its own product,
it “cannot be the basis for antitrust liability.” Id. at 7.
StubHub appealed Judge Chesney’s decision to the Ninth Circuit
Court of Appeals on December 1, 2015, USCA Case No. 15-17362.
Brieng on the appeal is currently scheduled to begin in June 2016.
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the challenged rule in serving its procompetitive purpose. 802 F.3d
at 1074-76 (adding that viable alternatives should not increase costs
signicantly, and that “courts should not use antitrust law to make
marginal adjustments to broadly reasonable market restraints”).
The O’Bannon decision seems anomalous if viewed as
exonerating an agreement among otherwise competing joint
venturers to fix the price at which they individually purchase
inputs (recruit student athletes) for a product they sell individually.
A procompetitive joint venture among purchasers typically involves
joint purchasing, resulting in transaction cost savings and economies
of scale,
2
while the hallmark of an anticompetitive cartel among
purchasers is agreement on a maximum price to be paid individually
(which generally reects an attempt to exploit joint market power).
Thus, in Law v. NCAA, 134 F.3d 1010 (10th Cir. 1998), an NCAA
rule capping compensation payable by its members individually
to their own entry-level assistant coaches was condemned under
quick-look antitrust review.
Alternatively, O’Bannon can be viewed as recognizing
procompetitive justication for a particular “product standard” set by
the NCAA, relating to inputs purchased by its members individually
for products they produce jointly, with the twist that the standard at
issue, amateurism, requires non-compensation of college athletes
beyond the full cost of attending college. The Supreme Court
recognized in the University of Oklahoma case that the NCAA plays
an important procompetitive role in setting intercollegiate athletic
“product standards” such as amateurism, academic criteria, the
size of teams and rules of the game, etc. (although the issue in
that case involved sales restrictions rather than product standards).
The Ninth Circuit essentially held in O’Bannon that the restriction
on price competition among NCAA members in recruiting student
athletes was justied by the procompetitive role of the amateurism
standard for products comprised of intercollegiate athletics.
Standards for professional services are likewise typically set by
joint ventures among competitors, as are technological standards
for product safety and performance or – particularly in the case of
smartphone components and other high-tech products (as well as
intercollegiate athletics) – product compatibility within networked
systems of interoperable complementary products. In these
contexts as well, standard-setting may generally be procompetitive
but nonetheless may raise antitrust issues relating to price collusion
or market exclusion.
2
See Northwest Wholesale Stationers, Inc. v. Pacic Stationery & Printing Co.,
472 U.S. 284, 295 (1985).
On the one hand, in National Society of Professional Engineers v.
United States, 435 U.S. 679 (1978), even bona de safety and
quality concerns could not justify a professional association’s ethical
standard barring any competitive bidding by its member engineers –
a standard that, unlike the amateurism standard in O’Bannon, was
not ancillary to any procompetitive provision of a joint product or
service. And a trade association’s rigid quality standard (high or low)
that restricts marketplace choice without substantial procompetitive
justication may be viewed as simply a cartel’s device for restraining
price competition. See Standard Sanitary Mfg. Co. v. United States,
226 U.S. 20 (1912) (standard that restrained sale of products with
minor defects); United States v. American Radiator & Standard
Sanitary Corp., 433 F.2d 174, 186 (3d Cir. 1970) (standard that
excluded lower-quality products); National Macaroni Mfgrs. Assn. v.
FTC, 345 F.2d 421 (7th Cir. 1965) (standard that restrained quality
and cost of input purchased).
On the other hand, a professional association’s ethical standard
constraining misleading advertising of competitive pricing may be
justied under the antitrust rule of reason. See California Dental
Assn. v. FTC, 526 U.S. 756 (1999). And a broad joint venture among
competing suppliers of computer operating systems that undertakes
to standardize system specications and inputs, in part through
competitive bidding by input suppliers, does not necessarily violate
antitrust law (irrespective of market power) so long as it engages
simply in joint price-shopping for purposes of selecting standard
inputs, rather than restraining purchasing of non-standard inputs
by its members individually (a distinction not drawn in O’Bannon,
which involved joint production as well as joint standards). See
Addamax Corp. v. Open Foundation, Inc., 152 F.3d 48 (1st Cir. 1998)
(resolving case on other grounds).
A similar antitrust issue may arise in any high-tech industry to
the extent that a standard-setting organization (SSO) – a type of
joint venture among its members (including competitors) – seeks
specic price-cap commitments in advance (ex ante) from holders of
patent rights that may need to be licensed to manufacturers if their
products are to meet technology standards under consideration by
the SSO. While a few SSOs have pursued this policy, most SSOs
have required simply a general commitment from patent-holders,
as a condition of approving industry standards incorporating their
patented technology, that their standard-essential patents (SEPs)
will be available for licensing to standard-implementers on ‘fair/
reasonable and non-discriminatory’ (F/RAND) terms. This approach
postpones specication of those terms, including a maximum royalty
rate and base, until after adoption of patent-based standards, and
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6
after substantial investments by manufacturers for the purpose of
meeting those standards, in reliance on F/RAND commitments by
SEP-holders. As a result, manufacturers undertaking to meet such
standards are effectively locked-in to obtaining licenses of SEP
rights on terms that remain to be determined (post hoc), under
amorphous F/RAND criteria, through negotiation, arbitration, or
litigation that may be contentious and protracted.
3
This problem may be mitigated to the extent that an ex ante
approach by SSOs – seeking voluntary commitment by SEP-holders
to specic license terms prior to incorporating patented technology
into industry standards – is justiable under the antitrust rule of
reason. The ex ante scenario is potentially procompetitive to the
extent it may (1) foster price competition among SEP-holders
(where more than one patented technology merits consideration in
setting a particular standard), (2) increase utilization of SEPs – thus
increasing output (and the volume of SEP royalty streams) – by
making the patented technology a more cost-effective and widely
implemented industry standard, and (3) avoid conferring market
power on SEP-holders, or enhancing their bargaining leverage,
under the post hoc scenario, which can undermine efficient
negotiation of license terms, substantially increase transaction
costs of licensing SEPs, and forestall widespread implementation
of industry standards.
Joint negotiation by prospective licensees, through their SSO,
of specic SEP license terms (to bind SEP-holders at least) can
be analogized to joint purchasing by competitors that may be
procompetitive to the extent it reduces transaction costs and
increases output. In a similar vein, the First Circuit recognized in
Addamax that joint selection ex ante, by competing members of a
broad SSO, of a price-competitive input (license to use proprietary
software) for a product the SSO sought to standardize could
plausibly be justied as ancillary to procompetitive launching of
improved products. This view is supported by the Ninth Circuit’s
vindication in O’Bannon of the NCAA’s restriction on the price
payable by its competing members individually for a key input
(student athletic service) to their joint products (intercollegiate
athletic competition) – as reasonably necessary in providing those
distinctive products in accord with a procompetitive standard set by
NCAA members jointly. Accordingly, under Addamax and O’Bannon,
3
See generally J.L. Contreras, Fixing FRAND: A Pseudo-Pool Approach to
Standards-Based Patent Licensing, 79 Antitrust L.J. 47, 48-55, 67-69, 88-90
(2013); U.S. Department of Justice and the Federal Trade Commission (DOJ/FTC),
Antitrust Enforcement and Intellectual Property Rights: Promoting Innovation
and Competition, ch. 2 (April 2007) (hereinafter, “Policy Statement”) (available
at justice.gov/atr).
procompetitive standard-setting by SSO members may justify their
ancillary joint price-shopping and bargaining for SEP license terms
that include specic caps on royalty rates.
While it may thus be permissible in some circumstances for an
SSO to negotiate specic terms for licensing patent rights prior
to incorporating SEPs into industry standards, antitrust exposure
may arise unless any such bargaining is conned to providing non-
coercive guidance regarding license terms that may be acceptable
to most SSO members. All SSO members should nonetheless
remain free to select technology individually (both in voting on an
industry standard and in making their own products) and to negotiate
license terms individually, whether upon failure of joint negotiations
or otherwise (and potential IP licensors should be so informed by
the SSO). Any agreement or pressure among SSO members
to forgo independent decision-making that would otherwise be
exercised in this regard might be viewed as potentially restraining
technological innovation by jointly imposing infra-competitive license
terms – suppressing anticompetitively the price paid for licenses of
patented technology.
Accordingly, if an SSO, by vote of its members, (i) accepted
or (ii) rejected license terms (maximum royalties) sought by a
SEP-holder ex ante, dissenting or wavering members should each
remain fully free to (i) utilize competing technology rather than
technology covered by the SEP or (ii) utilize the SEP technology,
on any license terms that become or remain available, rather than
any competing technology that a majority of SSO members may
approve as an appropriate industry standard. Preserving such
freedom of independent decision-making may ensure that ongoing
competition, in both price and technological quality, is the ultimate
determinant of an industry standard.
Freedom to negotiate individually was an important element
of the Supreme Court’s decision in Broadcast Music, Inc. v. CBS,
441 U.S. 1 (1979), holding that a joint venture among potentially
competing copyright-holders to package together their respective
copyrights under a blanket license (authorizing unlimited use of
their collective musical compositions, for a price independent
of the amount or type of music used), and to allocate blanket
licensing revenues among members, did not involve per se unlawful
price-xing – although the joint venture encompassed both joint
‘purchasing’ (non-exclusive licensing) of IP inputs from its members
and joint ‘selling’ (non-exclusive licensing) of the assembled product.
The Court held that this joint licensing activity could be justied under
the antitrust rule of reason as ancillary to procompetitive assembly
and marketing of a distinctive product, the blanket license, providing
an efcient alternative to negotiating multiple licenses with individual
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copyright-holders (reducing transaction costs), but not restraining
licensing by the joint venturers individually.
4
Negotiation of SEP license terms by SSOs ex ante may likewise
reduce licensing transaction costs and foster procompetitive
development of interoperable products, provided that SSO
members remain fully free to negotiate individually. The federal
antitrust enforcement agencies have accordingly recognized that
such negotiations may be permissible under the antitrust rule
of reason.
5
The agencies have similarly recognized latitude for
physicians, through their professional associations, jointly to provide
insurers with information supporting increased remuneration of
physicians under health insurance plans – so long as physicians
do so non-coercively, in that they remain free to decide individually,
unencumbered by any anticompetitive agreement or pressure
among competing physicians, whether to participate in any particular
health insurance plan.
6
Freedom of SSO members to act independently should be
preserved not only in any joint negotiation of SEP licensing terms, but
also in implementing any standard approved by an SSO. Whatever
the justication for approving a particular standard, it should be
effectuated by regulators adopting it or by marketplace actors
individually choosing to be guided by it, rather than by preemptive
agreement among potentially competing members of an SSO. In
Radiant Burners, Inc. v. Peoples Gas Light & Coke Co., 364 U.S.
656 (1961), the Supreme Court held that an agreement among SSO
4
Cf. Major League Baseball Properties, Inc. v. Salvino, 542 F.3d 290 (2d Cir.
2008) (trademark-licensing joint venture among sports league franchises had
plausible procompetitive justication for restricting licensing by its members
individually -- to prevent ‘free-riding’ on a joint entertainment product and promote
competitive balance among members, adding to the appeal of their joint product);
O’Bannon, 802 F.3d at 1059, 1072 (competitive balance among NCAA members
not substantially promoted by challenged rule); University of Oklahoma, 468 U.S.
at 117-19 (same); American Needle, Inc. v. NFL, 560 U.S. 183 (2010) (because
similar trademark-licensing joint venture did not preclude licensing by members
individually, its blanket licensing reected concerted action among potentially
competing members, subject to the antitrust rule of reason); Texac o, Inc. v.
Dagher, 547 U.S. 1 (2006) (joint venturers’ collaborative uniform pricing of
separate brands of gasoline produced by the joint venture readily withstood
quick-look antitrust scrutiny).
5
DOJ/FTC Policy Statement, supra note 3, at 37, 52-56. Cf. Sony Elec., Inc. v.
Soundview Tech., Inc., 157 F. Supp. 2d 180 (D. Conn. 2001) (declining to dismiss
patent-holder’s antitrust claim that pursuant to price-xing conspiracy, SSO
members agreed not to negotiate licenses individually).
6
See Statements of Antitrust Enforcement Policy in Healthcare (DOJ/FTC August
1996) (available at justice.gov/atr), Statement No. 5. See also International
Healthcare Management v. Hawaii Coalition for Health, 332 F.3d 600, 605-07
(9th Cir. 2003) (endorsing similar approach). Cf. Arizona v. Maricopa County
Medical Assn., 457 U.S. 332 (1982) (holding that physicians may not agree among
themselves on maximum fees for services they provide individually under health
insurance plans, expressing concern that physicians could thereby dictate the
level of their remuneration by insurers).
members to exclude non-standard products from the market (by
denying gas to users of a disapproved gas burner) may amount to
a per se antitrust violation (boycott). Courts have likewise indicated
that procompetitive justications for joint standard-setting do not
likely extend to any agreement among competitors to adhere to the
standards approved.
7
Similarly, in Polygram Holding, Inc. v. FTC,
416 F.3d 29 (D.C. Cir. 2005), the court condemned, under quick-look
antitrust scrutiny, a collateral agreement between joint venturers, in
promoting a new product jointly, to restrain promotion of competing
products they marketed individually – analogous to SSO members
constraining the market for competing technology by agreeing to
use individually only technology promoted by the SSO as a putative
industry standard.
8
The O’Bannon decision, by comparison, permitted a joint
venture to enforce a standard restraining arguable innovation
(and competitive bidding) within the joint venture, where doing
so was ancillary to the joint production and continuing integrity of
its distinctive products (amateur intercollegiate athletics). While
the standard, by restricting compensation of college athletes,
may have restrained innovative commercial use of their names,
images and likenesses (by authorized third-party providers of
computer applications simulating products jointly produced by NCAA
members), the NCAA had no occasion to restrict its members from
competing outside their joint venture, as by also participating in
some intercollegiate sports through a hypothetical Non-amateur
Collegiate Athletic Association.
Similarly, an SSO may arguably restrain innovation simply by
successfully promoting standardization of a particular technology,
yet can presumably avoid antitrust liability so long as it adheres to
a fair and objective standard-approval process.
9
Antitrust exposure
7
In addition to the Addamax case, see Consolidated Metal Prod., Inc. v. American
Petroleum Institute, 846 F.2d 284, 291-92 & n.23, 296 (5th Cir. 1988) (danger
to competition small so long as “users choose freely to rely on [SSO] approval”
and are not constrained by agreement or undue pressure to use only approved
products); Schachar v. American Acad. of Ophthalmology, 870 F.2d 397, 398-99
(7th Cir. 1989) (similar as to surgical procedure called into question by professional
association); cf. Standard Sanitary and kindred cases addressed supra.
8
Cf. Princo Corp. v. ITC, 616 F.3d 1318, 1336, 1339 (Fed. Cir. 2010) (en banc)
(joint venture sharing cost and risk of pursuing research and development had
plausible procompetitive justication for restricting member from exploiting or
undermining joint investment by individually promoting competing technology);
id. at 1352-53 (dissenting opinion) (such ‘[a]greements not to compete are … of
particular concern where, as here, the competitors collectively enjoy a monopoly
position and set standards for an industry” through licensing vel non of their
patented technologies).
9
See Allied Tube & Conduit Corp. v. Indian Head, Inc., 486 U.S. 492, 501 (1988);
American Society of Mechanical Engineers v. Hydrolevel Corp., 456 U.S. 556,
576-77 & n.15 (1982).
Spring 2016
8
8
New York Attorney General Investigating Ticket
Sale Practices of Sports and Entertainment
Companies
Justin A. Cohen
1
On January 28, 2016, New York Attorney General
Eric Schneiderman (“NYAG”) announced that his ofce is opening
an investigation into the ticket-selling practices of sports and
entertainment companies, including the National Football League.
In a 43-page report entitled Obstructed View: What’s Blocking
New Yorkers from Getting Tickets (hereafter, the “Report”), the
NYAG’s ofce criticized these ticket selling practices as deceptive,
unfair, and having the result of excluding average fans from
purchasing tickets at face value, if they can purchase tickets at all.
The Report focuses on a number of industry practices, including
reserved tickets for pre-sale promotions and brokers using bots to get
around ticket purchase limits, but this note will focus on ticket resale
price oors employed by the NFL and condemned in the Report.
The NFL, along with Ticketmaster, operates an online platform
for secondary ticket sales, called the NFL Ticket Exchange, which is
described as the “only NFL approved ticket exchange for tickets” on
its Facebook page. The Report states that the NFL Ticket Exchange
sets price oors on ticket resales, which often prohibit a ticketholder
from selling his or her ticket for below the face value. The NYAG
expresses two primary concerns with this set of practices. First,
consumers are not informed that the tickets they are purchasing are
not priced at face value, and are thus deceived into thinking they are
paying a price set by the NFL or the NFL home team. Second, price
oors articially raise prices and do not allow for lack of demand for
particular games or seats to impact pricing.
1
Justin A. Cohen is an associate in the New York ofce of Wilson Sonsini Goodrich
& Rosati.
The Report recommends that the New York legislature act to put
in place resale markup caps and that industry participants, such as
the NFL Ticket Exchange, increase transparency regarding the fact
that purchasers are not buying tickets at face value.
Some legal analysts believe that the Report may lead to antitrust
problems for the NFL. University of New Hampshire School of Law
Professor Michael McCann writes that the NYAG could potentially
bring claims under an illegal resale price maintenance theory or by
alleging that the NFL, NFL teams, and Ticketmaster have conspired
to x prices.
2
Professor McCann, however, quickly notes that there
is recent precedent suggesting that such litigation may be fruitless.
In November 2015, Judge Maxine Chesney of the Northern District
of California, dismissed an antitrust lawsuit brought by StubHub
against Ticketmaster and the Golden State Warriors. In that case,
StubHub alleged that the agreement between the Warriors and
Ticketmaster to become the Warriors’ exclusive ticket resale partner
violated Sections 1 and 2 of the Sherman Act. However, Judge
Chesney disagreed, nding that every manufacturer has a natural
monopoly in its own product and the sale of that product cannot be
the basis for antitrust liability.
3
Because the prospects of antitrust litigation are uncertain, the
more prudent course if the NYAG wants to change teams’ ticket–
selling practices may be to work with the New York legislature
to implement the changes and recommendations outlined in the
Report. Such an approach may lead to consumers having better
access and paying lower prices for tickets to the sports events and
concerts that they want to attend.
2
Michael McCann, “Breaking down N.Y.’s investigation into NFL ticket sale
practices,” Sports Illustrated (Jan. 28, 2016), http://www.si.com/n/2016/01/28/
n-ticket-prices-investigation-eric-schneiderman.
3
StubHub, Inc. v. Golden State Warriors, LLC, No. C 15-1436 MMC, 2015
WL 6755594 (N.D. Cal. Nov. 5, 2015).
increases, however, to the extent SSO members jointly restrain
competitive choice of technology in ways beyond simply approving
standards, whether by coercively enforcing standards (as in
Radiant Burners) or by agreeing not to use non-approved technology
individually (particularly if participants jointly have market power).
With those caveats, SSO members may have ample latitude under
the antitrust rule of reason to negotiate SEP licensing terms jointly,
prior to incorporating SEPs into approved industry standards.
As O’Bannon demonstrates, optimal procompetitive standard-
setting may be inextricably intertwined with the cost of inputs for a
standardized product.
