Chicago Professional Sports Ltd. Partnership v. National Basketball Ass'n

• Decision Date: 04 June 1992
• Docket Number: No. 91-1434,91-1434
• Citation: 961 F.2d 667
• Parties: , 1992-1 Trade Cases P 69,781 CHICAGO PROFESSIONAL SPORTS LIMITED PARTNERSHIP and WGN Continental Broadcasting Company, Plaintiffs-Appellees, v. NATIONAL BASKETBALL ASSOCIATION, Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 667

961 F.2d 667

60 USLW 2685, 1992-1 Trade Cases P 69,781

CHICAGO PROFESSIONAL SPORTS LIMITED PARTNERSHIP and WGN Continental Broadcasting Company, Plaintiffs-Appellees, v. NATIONAL BASKETBALL ASSOCIATION, Defendant-Appellant.

No. 91-1434.

United States Court of Appeals Seventh Circuit.

Argued Oct. 17, 1991.

Decided April 14, 1992.

Rehearing and Rehearing En Banc

Denied June 4, 1992.

Joel G. Chefitz (argued), Stephen D. Libowsky, James E. Hanlon, Jr., Andrew Hale, Audrey G. Young, Katten, Muchin & Zavis, Chicago, Ill., for Chicago Professional Sports Limited Partnership, plaintiff-appellee.

John R. McCambridge (argued), Irving C. Faber, Darrell J. Graham, Eric D. Brandfonbrener, Grippo & Elden, Chicago, Ill., for WGN Continental Broadcasting Co., plaintiff-appellee.

David D. Hiller, Charles J. Sennet, Tribune Co.

Jeffrey A. Mishkin (argued), Marc J. Goldstein, Michael A. Cardozo, David M. Lederkramer, Bradley I. Ruskin, Proskauer, Rose, Goetz & Mendelsohn, New York City, Christopher Wolf, Warren L. Dennis, Proskauer, Rose, Goetz & Mendelsohn, Washington, D.C., Tyrone C. Fahner, Kenneth E. Wile, Matthew A. Rooney, Herbert L. Zarov, John E. Muench, Mayer, Brown & Platt, Chicago, Ill., for defendant-appellant.

James W. Quinn, Jeffrey L. Kessler, Bruce S. Meyer, Weil, Gotshal & Manges, New York City, for National Basketball Ass'n amicus curiae.

Stephen F. Ross, University of Illinois College of Law, Champaign, Ill., Gene Kimmelman, Consumer Federation of America, Washington, D.C., for Consumer Federation of America amicus curiae.

Before BAUER, Chief Judge, and CUDAHY and EASTERBROOK, Circuit Judges.

EASTERBROOK, Circuit Judge.

WGN-TV, channel 9 in Chicago, is called a superstation because cable systems throughout the nation carry its signal. During the 1990-91 season WGN telecast 25 games of the Chicago Bulls, one of 27 teams in the National Basketball Association. During the 1991-92 season WGN will telecast 30 of the Bulls' regular-season games. This is a boon to fans, for, apart from the seven contests broadcast on network TV, the remainder of the Bulls' 82 regular-season games appear on SportsChannel, which is available only on cable. It is a boon as well to the Bulls' owners, who collect larger royalties from WGN than from SportsChannel, in light of WGN's greater audience. But it is a bane to the other clubs, which would prefer to have fans watch their contests rather than tune in the Bulls, who, thanks to Michael Jordan and Scottie Pippen (to name only the Olympians), are the winningest and most popular team in the NBA.

Owners decided that only networks holding authority from the league may telecast nationally. The NBA sold to the National Broadcasting Company the right to broadcast 26 regular-season games; it sold 50 to Turner Network Television, a cable network. NBC gets first dibs. Clubs may telecast 41 games per season over the air to their home markets and put the other 41 on local cable, keeping the proceeds. No team may broadcast a game in competition with NBC, and superstations encounter two additional limits: they may carry no more than 20 games and may not telecast in competition with TNT. The cap, adopted in 1990 over the dissent of the Bulls and the New Jersey Nets, sparked this suit under the Sherman Act, 15 U.S.C. § 1. The Bulls and WGN characterize the NBA as a cartel that has slapped a limit on the output of broadcast games, something that is illegal under the antitrust laws. The NBA replies that it is a joint venture and that all broadcasting rules are lawful ancillary restraints. Both sides seek comfort in National Collegiate Athletic Association v. Board of Regents of the University of Oklahoma, 468 U.S. 85, 104 S.Ct. 2948, 82 L.Ed.2d 70 (1984). Seven weeks after the complaint was filed, the district judge held a five-day trial and promptly enjoined the NBA from enforcing the 20-game limit. 754 F.Supp. 1336 (N.D.Ill.1991). The district court's extensive opinion describes both the NBA's rules and the operation of superstations; we refrain from duplication. Challenges to some of the NBA's other broadcasting rules remain for decision in the district court. We confine our attention to the 20-game restriction.

I

Antitrust injury is one subject in particular that has not been presented for decision here. In the district court the NBA argued that the Bulls and WGN have not established that they suffer antitrust injury. The district court disagreed, 754 F.Supp. at 1352-55, and the NBA has dropped the point. Some of the district court's discussion suggests that the NBA confused antitrust injury with avoidable injury; the district court replied that the plaintiffs' ability to restructure their transactions to avoid some of the effects of the 20-game rule is neither here nor there for purposes of the antitrust injury doctrine.

Injury in fact establishes standing under Article III of the Constitution. Without question the Bulls and WGN suffer injury in fact. Antitrust injury is a different beast. The antitrust laws throttle some cooperative behavior of producers to preserve the benefits of competition for consumers. Producers often complain about the efforts of business rivals, which reduce their profits. E.g., A.A. Poultry Farms, Inc. v. Rose Acre Farms, Inc., 881 F.2d 1396 (7th Cir.1989); Indiana Grocery, Inc. v. Super Valu Stores, Inc., 864 F.2d 1409 (7th Cir.1989); Ball Memorial Hospital, Inc. v. Mutual Hospital Insurance, Inc., 784 F.2d 1325 (7th Cir.1986). Judicial relief from the real injuries caused by rivalry would harm the consumers the antitrust laws are supposed to protect. See William J. Baumol & Janusz A. Ordover, Use of Antitrust to Subvert Competition, 28 J.L. & Econ. 247 (1985); Edward A. Snyder & Thomas E. Kauper, Misuse of the Antitrust Laws: The Competitor Plaintiff, 90 Mich.L.Rev. 551 (1991). The antitrust injury doctrine of Atlantic Richfield Co. v. USA Petroleum Co., 495 U.S. 328, 110 S.Ct. 1884, 109 L.Ed.2d 333 (1990); Cargill, Inc. v. Monfort of Colorado, Inc., 479 U.S. 104, 107 S.Ct. 484, 93 L.Ed.2d 427 (1986); and Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 97 S.Ct. 690, 50 L.Ed.2d 701 (1977), requires every plaintiff to show that its loss comes from acts that reduce output or raise prices to consumers. Isaksen v. Vermont Castings, Inc., 825 F.2d 1158 (7th Cir.1987); Local Beauty Supply, Inc. v. Lamaur, Inc., 787 F.2d 1197 (7th Cir.1986).

Whenever producers invoke the antitrust laws and consumers are silent, this inquiry becomes especially pressing. The Bulls and WGN are producers. Their natural desire is higher prices and protection from competition. It may be that WGN in its role as purchaser of sports contests is a good proxy for the ultimate consumers--who are, depending on one's perspective, either the persons who watch the games on TV or the advertisers who "buy viewers" from TV stations as an input into promotion of other products. We assume that this subject will be explored further in the proceedings yet to come.

II

As a basketball league, the NBA claims the protection of the Sports Broadcasting Act, 15 U.S.C. § 1291:

The antitrust laws ... shall not apply to any joint agreement by or among persons engaging in or conducting the organized professional team sport[ ] of ... basketball ... by which any league of clubs ... sells or otherwise transfers all or any part of the rights of such league's member clubs in the sponsored telecasting of the games ... engaged in or conducted by such clubs.

In reply the district court observed that the statute speaks of "transfers" by "any league of clubs". What the NBA has done is forbid transfers, not make transfers; the league has regulated the activities of individual clubs, to which the Act does not apply. Accordingly the district court held that the statute does not exempt the NBA's rules from the antitrust laws. 754 F.Supp. at 1349-52.

No line between transfers made and transfers forbidden could be stable; they are two sides of the same thing. Property is a mixture of rights to use and to exclude others from using. Any transfer of broadcast rights entails exclusion of the competing uses of the same rights. Suppose the NBA sells to NBC the right to show all or any selection of its games, or carves the broadcast rights into thirds and parcels the rights among networks. See United States Football League v. National Football League, 842 F.2d 1335, 1353-55 (2d Cir.1988). Each grant to a network will be exclusive; what the network owns, a team cannot show separately (without the network's permission). Otherwise the league has little it can sell collectively. The Bulls acknowledge this by conceding that they may not sell to WGN a right to broadcast games that NBC has selected.

Unless the Act allows the league to bar broadcasting of at least some games, it is hard to see why it is cast as an exemption from the antitrust laws. Only a reduction in output allows producers to raise price. If the league arranges for the broadcast of every game (or if the clubs may broadcast every game the league does not), there is no reduction in output. To have any (antitrust) effect at all, the Act must allow the league to keep some games off the air. The statute allows the transfer of "all or any part of" the rights in the games; "part of" implies fewer than all. Even professional football, the sport with the most extensive broadcasting program, blacks out some home games. We therefore disagree with the district court to the extent it thought that the Sports Broadcasting Act applies only when the league arranges for (or permits) telecasting of every contest.

Still, the Sports Broadcasting Act applies only when the league has "transferred" a right to "sponsored telecasting". Neither the NBA's contract with NBC nor its contract with Turner Network Television transfers to the network a right to limit the broadcasting of other contests. Both contracts and, so far as we can tell, the league's articles and...