The NFL and DirecTV have found themselves tied up in an antitrust lawsuit that accuses them of overcharging for the popular Sunday Ticket television package. The suit alleges the “NFL-DirecTV” exclusive broadcasting agreement “unlawfully eliminates competition for game broadcasts" in violation of federal law.
In 2019, the U.S. Court of Appeals for the Ninth Circuit reversed a trial court dismissal of a case brought four years ago by a group of subscribers against the NFL and DirecTV. Earlier this month, the U.S. Supreme Court rejected an appeal by the NFL and DirecTV to avoid a proposed class-action lawsuit. The denial of writ of certiorari by the Supreme Court means the lawsuit can proceed, thus continuing to threaten the league and its current broadcasting partners.
The Start of What is Now a $1.5 Billion Per Year Partnership
More than two decades ago, the NFL Sunday Ticket came into existence as an out-of-market sports package that broadcasts NFL regular season games unavailable on local affiliates. Each team entered into a “Teams-NFL Agreement” with the NFL to pool their telecasting rights and give the NFL the authority to exercise those rights. This means individual teams are prohibited from entering into individual agreements with networks, satellite TV providers, or internet streaming services, as the NFL is only able to sell those rights. On behalf of the league's 32 teams, the NFL negotiated two agreements in which the teams’ telecast rights are licensed. Under the “NFL-Network Agreement,” CBS and FOX broadcast a limited number of “local games” through free, over-the-air television.Under the “NFL-DirecTV Agreement,” the NFL allows DirecTV to obtain all of the live telecasts produced by CBS and Fox, package those telecasts, and deliver the bundled feeds to Sunday Ticket subscribers.
As a result, if a fan does not subscribe to and purchase the package, he or she will have access to only two or three local games each Sunday afternoon during the regular season. Besides the Sunday Ticket, there is no other option for fans to watch any of the games that are unavailable through free, over-air-television.
In 2014, the two sides extended their partnership for a whopping $1.5 billion per year. For commercial subscribers, the price of the Sunday Ticket for the season varies depending on the establishment, ranging from $2,314 to $120,000 per year. The basic Sunday Ticket package for residential subscribers costs $293.94.
As if its steep price isn’t enough, the NFL continues to be the only major sports league with an exclusive out-of-market package as shown below.
NFL Sunday Ticket – Exclusive to DirecTV; Price: Ranges from $395.94 (MAX Package) to $293.94 (Basic Package); Student Price: $99.96
MLB Extra Innings – Available to DirecTV and most digital cable providers; Price: $183
MLS Direct Kick – Available to DirecTV, Dish Network and most digital cable providers; Price: $69 to $89
NBA League Pass – Available to DirecTV, Dish Network and most digital cable providers; Price: Ranges from $249.99 (All Teams w/ No Commercials) to $119.99 (One Team)
NHL Center Ice – Available to DirecTV, Dish Network and most digital cable providers; Price: Ranges from $130 to $160
So what's the legal issue with NFL and DirecTV’s exclusive arrangement?
The potential legal problem lies in the Sherman Act, the main federal antitrust law. The antitrust laws leave courts to decide which business practices are illegal based on the specific facts of each case. For more than 100 years, the antitrust laws have had the same basic objective: to protect the process of competition for the benefit of consumers, making sure there are strong incentives for businesses to operate efficiently, keep prices down, and keep quality up.
Plaintiffs allege that the NFL’s exclusive broadcasting agreements work together to suppress competition for the sale of professional football game telecasts in violation of §§ 1 and 2 of the Sherman Act.
Section 1 of the Sherman Act prohibits “[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States.” When considering agreements among entities involved in league sports, a court must determine whether the restriction is unreasonable under the rule of reason. Under this rule, “the facts peculiar to the business, the history of the restraint, and the reasons why it was imposed,” must be examined to determine the effect on competition in the relevant product market.
In reversing the District Court’s dismissal for failure to state a claim of an antitrust action, the Ninth Circuit panel held that plaintiffs stated a § 1 claim under the “Rule of Reason” because they adequately alleged the following elements: (1) a contract, combination, or conspiracy among two or more persons or business entities; (2) by which the persons or entities intended to harm or restrain trade; (3) and which actually injured competition; and (4) antitrust standing. The first and second elements were undisputed.
As to the third element, under National Collegiate Athletic Association v. Board of Regents of the University of Oklahoma, the panel held that plaintiffs plausibly alleged that the interlocking agreements caused injury to competition. The Court reasoned that this is the exact type of arrangement that the Supreme Court held caused an injury to competition in the context of college football. Further, as in NCAA, “an observer with even a rudimentary understanding of economics could conclude that the arrangements in question would have an anticompetitive effect on customers and markets.”
The Court determined the fourth element that plaintiffs had standing to challenge both the “Teams-NFL Agreement” and the “NFL-DirecTV Agreement” was satisfied. As to the “Teams-NFL Agreement,” the Court reasoned that when plaintiffs adequately allege that their injury was caused by a conspiracy to violate antitrust laws, even when the conspiracy involves multiple levels of producers, distributors, and sales, the plaintiffs sufficiently allege an antitrust injury that can withstand a motion to dismiss. As to the “NFL-DirecTV Agreement,” there was no dispute that the plaintiffs have standing because they are direct purchasers of DirecTV.
The panel also held that the plaintiffs adequately stated a claim under §2 of the Sherman Act in alleging that, by entering into interlocking agreements, the defendants conspired to monopolize the market for professional football telecasts and have monopolized it.Section 2 makes it unlawful for any person to “monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations . . . .”
Judge Ikuta reasoned that the plaintiffs plausibly made a case in their contention that the NFL’s relationship with DirecTV is clearly anticompetitive and financially harms fans. If each NFL franchise could individually sell their broadcasting rights, there would be much more local competition by television networks, and there would be far more games for fans to watch freely.
The League clearly hoped for a dismissal by the Supreme Court, but with the lawsuit able to power forward, a settlement with the plaintiffs to make the case go away may be the next best move.
 Riccobono, Anthony. “NFL 'Sunday Ticket' Subscribers Just Got Closer To Getting A Refund.” International Business Times, 2 Nov. 2020, www.ibtimes.com/nfl-sunday-ticket-subscribers-just-got-closer-getting-refund-3075058.  Ninth Inning, Inc. v. DirecTV, No. 17-56119 (9th Cir. 2019); In re NFL Sunday Ticket Antitrust Litigation, No. 17-56119, 2019 U.S. App. (9th Cir. Oct. 16, 2019).  Id.  Id.  Id.  “Bundle DIRECTV.” AT&T Preferred Dealer, www.directpackages.com/packages/sports.html.  “The Antitrust Laws.” Federal Trade Commission, 15 Dec. 2017, www.ftc.gov/tips-advice/competition-guidance/guide-antitrust-laws/antitrust-laws.  Sherman Act, 15 U.S.C. §§ 1, 2.; The Sherman Antitrust Act was adopted in 1890 and is the primary federal antitrust law in the United States. The Act prohibits all contracts, combinations, and conspiracies that unreasonably restrain interstate trade as well as prohibits any efforts to monopolize any part of interstate commerce.  15 U.S.C. § 1.  NCAA v. Bd of Regents, 468 U.S. 85 (1984).  Nat’l Soc’y of Prof’l Eng’rs v. United States, 435 U.S. 679 (1978).  See NCAA.  Id.  Cal. Dental Ass’n v. F.T.C., 526 U.S. 756 (1999).  See NCAA.  Id.  Id.  15 U.S.C. § 2.