Fumbling the Antitrust Football:The NFL Blackouts of 2004-2005

OLUNTARY

RADE

EPORTS

. 6D

ECEMBER

2005Introduction

Hurricane Wilma passed through south Florida on October 24, 2005. In anticipation of thestorm, the National Football League rescheduled a regular season game between the KansasCity Chiefs and the Miami Dolphins, to be played at Dolphins Stadium, from Sunday,October 23, to Friday, October 21, at 7 p.m. local time. The Chiefs rushed to Miami, anddespite landing less than six hours before the kickoff, defeated the Dolphins 30-20.A paid attendance of 68,350 was announced, though the actual attendance wassubstantially lower. Had the game been played on Sunday as originally scheduled, thousandsof Dolphins and Chiefs fans would have watched the game live on CBS and DirecTV, whichhave the contractual rights to broadcast NFL games. But a 1950s Justice Department lawsuitand a subsequent 1961 amendment to the federal antitrust laws prohibited these contractsfrom being carried out. The NFL is effectively barred from televising any of its games on mostFridays and Saturdays during its regular season. This paper discusses the interaction of theantitrust laws and the telecasting of professional football, and why even a hurricane couldn’tovercome the political force of the federal antitrust laws.

Before There Was a Super Bowl

The American Professional Football Association was organized following two meetingsin Canton, during the summer of 1920, between professional football clubs representing fourstates. Fourteen clubs competed at various points during the inaugural 1920 season, but onlytwo have survived to this day: The Chicago Cardinals, now the Arizona Cardinals; and the

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ISSN applied for), number 6, is published biweekly by Citizens for Voluntary Traded/b/a The Voluntary Trade Council, Post Office Box 100073, Arlington, VA 22210. S.M. Oliva, editor.

©2005 by The Voluntary Trade Council. All rights reserved. This publication may be freely copied anddistributed, with attribution to the Voluntary Trade Council as author, for non-commercial purposes. Forcommercial reprint permission, contact the Voluntary Trade Council, (703) 740-8309 orinfo@voluntarytrade.org. Visit the Voluntary Trade Council’s website at www.voluntarytrade.org.

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Decatur Staleys, now the Chicago Bears. In 1922, the APFA changed its name to theNational Football League. Throughout the NFL’s early years, franchises came and went,and at one point there were 22 clubs playing an irregular league schedule.By the early 1940s, the NFL had settled down to 10 teams playing a common 11-game schedule with a championship game featuring the winners of the league’s easternand western divisions. On December 8, 1940, the championship game between theChicago Bears and the Washington Redskins—a 73-0 rout by Chicago—became the firstNFL game carried on nationwide radio. The Mutual Broadcasting System paid $2,500 tobroadcast Red Barber’s play-by-play over 120 stations.Ten years later, the advent of the television age opened up new possibilities forNFL clubs. The Los Angeles Rams, the first NFL team on the west coast, was also thefirst club to televise all of their home and away games. Other clubs followed suit, andsoon thereafter the league office, under the leadership of Commissioner Bert Bell,decided to adopt a common television policy. Of primary concern was the impact oftelevising games on live attendance. The Rams had experienced a decline in attendanceduring the 1950 season when their home games were televised. Given that televisionrights fees were then insignificant compared to ticket and related stadium revenue, theNFL was justifiably concerned that television would cannibalize its live product.Accordingly, in 1951, the NFL owners adopted Article X to the league’s by-laws. ArticleX prohibited the telecasting of any NFL games within the “home territory” of a teamplaying a home game that day. The home territory was generally defined as a 75-milezone surrounding the team’s home city.

This core provision of Article X has beencommonly referred to as the

blackout rule

.Article X did permit a team to broadcast its away games in its home territory.However, teams could not broadcast their games in another team’s home territory, evenif the other team was playing an away game, without the permission of the teamsplaying the other game. To put all this into context, suppose on a given Sunday therewere two NFL games being played: Chicago at Cleveland, and Green Bay at New York.Under Article X, the Chicago-Cleveland game could be telecast in Chicago (the awayteam) but not Cleveland. The Green Bay-New York game could not be telecast inChicago

Cleveland, unless Chicago, Cleveland, and the commissioner granted a

1Exceptions to the 75-mile limit were made for Green Bay, whose territory included Milwaukee; NewYork and Chicago, which then had two NFL franchises; and NFL cities within 100 miles of eachanother, such as New York & Philadelphia and Baltimore & Washington. These rules and exceptionsappear to remain in effect today.

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waiver of the blackout rule.

Such waivers were not commonly granted at the time.Similar rules applied to radio broadcasts.Article X also granted the commissioner “sole jurisdiction” over all radio andtelevision rights for the annual championship game

For 1951, the NFL sold thechampionship game’s television rights to the DuMont network for $75,000 per year.DuMont held the rights until it ceased network operations in 1955, when NBC assumedthe contract for $100,000 per year.In 1953, the United States Department of Justice filed a lawsuit in Philadelphia,Pennsylvania, where the NFL was then headquartered, seeking an injunction to preventthe continued enforcement of Article X, which the government alleged violated SectionOne of the Sherman Act, 15 U.S.C. § 1. Section One broadly prohibits “[e]very contract,combination * * * or conspiracy in restraint of trade or commerce among the severalstates.” The courts have interpreted this to mean that only “unreasonable” restraints oftrade are illegal, but only the courts can determine what in fact is unreasonable.The case was assigned to U.S. District Judge Allan K. Grim, a former DemocraticParty official appointed to the bench three years earlier by President Truman. OnNovember 12, 1953, Grim partially granted the government’s request for an injunction.

Grim upheld the blackout rule as it applied to home territories where a home game wasbeing played, but he said the NFL could not prevent any team from telecasting itsgames in another team’s home territory on days when there was no home game. Thus,the hypothetical Green Bay-New York game discussed above could now be televised inChicago, whose team was playing an away game, but not in Cleveland, which washosting that game. The Chicago-Cleveland game would still be blacked out inCleveland but not Chicago. This home blackout rule would be affirmed by anotherfederal judge in 1962.Grim was persuaded by the NFL’s claim that allowing telecasts of home games inhome territories “has an adverse effect” on home attendance, and that “[t]his clearlyindicates by implication that the telecast of an outside game, particularly a head-ongame, also adversely affects attendance at a home game.”

Grim concluded that suchrestrictions were pro-competitive under the Sherman Act:

2Article X prohibited teams from accepting any payment in exchange for granting such a waiver.3The participating teams in the championship game did, however, have the right to sell “non-exclusive” radio rights within their home territories only.4Grim’s decision was reported at 116 F. Supp. 319 (E.D. Pa.)5116 F. Supp. at 325.