GRIM, District Judge.
Article X of the by-laws of the National Football League provides that no club shall cause or permit a game in which it is engaged to be telecast or broadcast by a station within 75 miles of another League City on the day that the home club of the other city is either playing a game in its home city or is playing away from home and broadcasting or televising its game by use of a station within 75 miles of its home city, unless permission for such broadcast or telecast is obtained from the home club.
The government has filed this action seeking an injunction against the enforcement of the provisions of Article X, contending that they are illegal under the Sherman Act, 15 U.S.C.A. § 1 et seq., which provides:
The by-laws have been agreed to by all the League members and are binding upon all of them. They clearly constitute a contract within the meaning of the word as it is used in the Sherman Act. Associated Press v. United States, 326 U.S. 1, 8, 65 S.Ct. 1416, 89 L.Ed. 2013.
An analysis of the provisions of Article X and of the evidence pertaining thereto shows that Article X contains four basic provisions material to this anti-trust suit. (1) It prevents the telecasting of outside games into the home territories of other teams on days when the other teams are playing at home. (2) It prevents the telecasting of outside games into the home territories of other teams on days when the other teams are playing away from home and permitting the telecast of their games into their home territories. (3) It prevents the broadcasting by radio of outside games into the home territories of other teams both on days when the other teams are playing at home and on days when the other teams are playing away from home and are permitting the games to be broadcast or televised into their home territories. (4) It gives the Football Commissioner an unlimited power
Is the provision which prevents the telecasting of outside games into the home territories of other teams on days when the other teams are playing at home illegal?
There can be little doubt that this provision constitutes a contract in restraint of trade. The market for the public exhibition of football no longer is limited to the spectators who attend the games. Since the advent of television and radio, the visual and aural projections of football games can be marketed anywhere in the world where there are television or radio facilities to transmit and receive them. When a football team agrees to restrict the projection of its games in the home areas of other teams it thereby cuts itself off from this part of its potential market. Since the clubs of the National Football League have agreed at certain times not to project their games into the home territories of other clubs they have given that part of their market at those certain times exclusively to other teams. In return, each of them has been given the right to market its own games without competition in its own home area under the same circumstances. The purpose and effect of this is to restrict outside competition on the part of other teams in the home area of each club. This, therefore, is a clear case of allocating marketing territories among competitors, which is a practice generally held illegal under the anti-trust laws. United States v. Addyston Pipe & Steel Co., 6 Cir., 85 F. 271, affirmed 175 U.S. 211, 20 S.Ct. 96, 44 L.Ed. 136; United States v. Aluminum Co. of America, 2 Cir., 148 F.2d 416, 427.
An allocation of marketing territories for the purpose of restricting competition, however, is not always illegal. There is no simple formula "to displace the rule of reason by which breaches of the Sherman Law are determined. Nor is `division of territory' so self-operating a category of Sherman Law violations as to dispense with analysis of the practical consequences of what on paper is a geographic division of territory." Timken Roller Bearing Co. v. United States, 341 U.S. 593, 605, 71 S.Ct. 971, 978, 95 L.Ed. 1199 (dissenting opinion of Justice Frankfurter).
An agreement may constitute a restraint of trade, but that does not necessarily mean that it is illegal. To be illegal a contract must cause both a restraint of trade and an unreasonable restraint of trade. Standard Oil Co. of New Jersey v. United States, 221 U.S. 1, 31 S.Ct. 502, 55 L.Ed. 619; United States v. American Tobacco Co., 221 U.S. 106, 31 S.Ct. 632, 55 L.Ed. 663; Appalachian Coals, Inc. v. United States, 288 U.S. 344, 53 S.Ct. 471, 77 L.Ed. 825; United States v. Columbia Steel Co., 334 U.S. 495, 68 S.Ct. 1107, 92 L.Ed. 1533.
The principal question in the present case is whether the particular restraints imposed by Article X are reasonable or unreasonable.
Professional football is a unique type of business. Like other professional sports which are organized on a league basis it has problems which no other business has. The ordinary business makes every effort to sell as much of its product or services as it can. In the course of doing this it may and often does put many of its competitors out of business. The ordinary businessman is not troubled by the knowledge that he is doing so well that his competitors are being driven out of business.
Professional teams in a league, however, must not compete too well with each other in a business way. On the playing field, of course, they must compete as hard as they can all the time. But it is not necessary and indeed it is unwise for all the teams to compete as hard as they can against each other in a business way. If all the teams should compete as hard as they can in a business way, the stronger teams would be likely to drive the weaker ones into financial failure. If this should happen not only would the weaker teams fail, but eventually the whole league, both the weaker and the stronger teams, would fail, because without a league no team can operate profitably.
It is particularly true in the National Football League that the teams should not compete too strongly with each other in a business way. The evidence shows that in the National Football League less than half the clubs over a period of years are likely to be financially successful. There are always teams in the League which are close to financial failure. Under these circumstances it is both wise and essential that rules be passed to help the weaker clubs in their competition with the stronger ones and to keep the League in fairly even balance.
The winning teams usually are the wealthier ones and unless restricted by artificial rules the rich get richer and the poor get poorer (as Commissioner
In order to try to keep its teams at approximately equal strength and to protect weaker teams from stronger teams, a league theoretically might use a number of devices. It might (1) limit the bonus price which could be paid to new players, (2) give the weaker teams a prior right over stronger teams to draft new players, (3) prohibit the sale of players after a certain day in the playing season, (4) limit the number of players on each team, (5) limit the total amount of salaries which a team can pay, (6) give the lowest team in the league the right to draft a player from the highest team, when and if the highest team has won a certain number (three for instance) of consecutive championships, and (7) reasonably restrict the projection of games by radio or television into the home territories of other teams.
It is easy to see that the first six devices would make it easier for weaker teams to compete with stronger ones.
A large part of defendants' evidence was directed to the question of whether the televising of a team's own home games
That the telecast of outside games into home territories adversely affects the attendance at home games is shown also by the experience of college football teams. Telecasts of games on the day they are played drastically and adversely affect gate receipts in the home area of the club where the television spectacle is shown. This is true whether the game being televised is an outside game or a home game as is shown by the National Opinion Research Center's studies. These studies are based solely upon data relating to the experience of college football with television, and because the testimony reveals some deficiencies in the methods pursued by the N. O. R. C. in making its studies and interpreting its data, its conclusions cannot be taken at full face value. However, the conclusions in these reports concerning the adverse effect of telecasts of college outside games on attendance at college home games do indicate that the telecasting of outside professional football games would have a similar adverse effect upon attendance at home games of the professional teams.
The greatest part of the defendant clubs' income is derived from the sale of tickets to games. Reasonable protection of home game attendance is essential to the very existence of the individual clubs, without which there can be no League and no professional football as we know it today.
This is not a case of one industry fighting the competition of another, as for instance coal fighting the competition of oil, or railroads fighting the competition of trucks, or moving pictures fighting the competition of television. Football provides a magnificent spectacle for television programs and television provides an excellent outlet and market for football. They both can use and indeed need each other. By working together intelligently each will be an important adjunct to the other. The objective of the clubs in agreeing to a television blackout of the home territory (except for the remote possibility of a home game telecast) during the day a home game is played is not to restrain competition among the individual clubs in the sale of television rights or competition among television stations and networks and advertisers and advertising agencies in the purchase of such rights. This particular restriction promotes competition more than it restrains it in that its immediate effect is to protect the weak teams and its ultimate effect is to preserve the League itself. By thus preserving professional football this restriction makes possible competition in the sale and purchase of television rights in
The purposes of the Sherman Act certainly will not be served by prohibiting the defendant clubs, particularly the weaker clubs, from protecting their home gate receipts from the disastrous financial effects of invading telecasts of outside games. The member clubs of the National Football League, like those of any professional athletic league, can exist only as long as the league exists. The League is truly a unique business enterprise, which is entitled to protect its very existence by agreeing to reasonable restrictions on its member clubs. The first type of restriction imposed by Article X is a reasonable one and a legal restraint of trade.
Is the restriction on telecasting outside games in home territories when the home teams are playing away games and telecasting them in their home territories illegal?
The reasonableness of this particular restriction
Several of defendants' witnesses attempted to justify the restriction with the opinion that it is necessary in this situation to protect the home team's "good will" by which they meant that the restriction is necessary to protect the home team from loss in gate receipts at subsequent home games. However, there is not one shred of evidence, not one specific example based on actual experience, to support this opinion which, more accurately stated, is nothing more than conjecture.
It is probably true, though not proved by the evidence, that the simultaneous telecasting of an outside game and an away game in the home area of the team playing away would result in a division of the television audience between the two games. Obviously the existence or the prospect of such competition would make the television rights to the home club's away games less attractive to sponsors and consequently less profitable to the club.
The record in this case contains no factual justification
Is the restriction of the broadcasting by radio of outside games in home territories on days when the home teams are playing at home and on days when the home teams are playing away games and are either televising or broadcasting them in their home territories illegal?
There is no evidence whatsoever indicating any adverse effect of radio broadcasts of outside games in the home territory of another club. Since each of the defendant clubs permits the broadcasting in its home area of all of its own games (both away games and home games), it is apparent that none of them feels that such broadcasts have any significant adverse effect on gate attendance at their own games. Indeed, the evidence indicates that broadcasts of outside games when there is no home game have a stimulating effect on attendance at home games because of the interest thereby created in professional football generally. Granting monopoly rights to broadcasts of away games (that is, the right to broadcast away games in the home territory coupled with the suppression of competition from "outside" broadcasts or telecasts) enhances the value of such rights to purchasers, but has no significant effect on attendance at football games. There is no factual justification for Article X's territorial restrictions on the sale of radio broadcasting rights. Therefore, they are illegal under the Sherman Act.
Is the power of the Football Commissioner to prevent all television and radio broadcasts of games illegal?
The fourth type of restriction imposed by Article X appears in the section which provides as follows:
The decision of the Commissioner in approving or disapproving contracts for the sale of radio and television rights is final, binding, conclusive and unappealable. Thus this section gives the League Commissioner, an employee of the League, unlimited and arbitrary power to prevent the broadcasting and televising of any and every game. He need assign no reason for his action. By virtue of his power to disapprove any and all contracts for the sale of radio and television rights he has the power to set up and enforce the very same restrictions hereinbefore held to be illegal. Therefore, it is apparent that the Commissioner must be prohibited from exercising his veto power over contracts for the purpose of maintaining and enforcing these illegal territorial restrictions. Unless his power is limited in this manner, it would be a futile act for the Court to enjoin these illegal restraints. Accordingly, the enforcement of Section 1(a) of Article X will be enjoined in such a way that the Commissioner will be prohibited from exercising his power to disapprove contracts for the purpose of effecting and maintaining the territorial restrictions hereinbefore held to be illegal.
Defendants contend that the action against them must be dismissed because professional football is not commerce or interstate commerce. This contention must be rejected. Radio and television clearly are in interstate commerce. Lorain Journal Co. v. United States, 342 U.S. 143, 72 S.Ct. 181, 96 L. Ed. 162; Allen B. Dumont Laboratories v. Carroll, 3 Cir., 184 F.2d 153. The restrictions by professional football on the sale of radio and television rights impose substantial restraints on the television and radio industry. Since the
I am not unmindful of the decisions of the Supreme Court in Federal Base Ball Club v. National League, 259 U.S. 200, 42 S.Ct. 465, 66 L.Ed. 898, and in the very recent cases, decided November 9, 1953, of Toolson v. New York Yankees, Inc., (Kowalski v. Chandler, and Corbett v. Chandler,) 73 S.Ct. 78. In those baseball "reserve clause" cases the Court dismissed anti-trust suits against the major professional baseball leagues on the theory that big-league baseball is a sport, local in its nature, and not interstate commerce. The only restriction alleged in the baseball cases was in the internal operation of professional baseball itself. The only question involved in those cases was whether professional baseball itself is interstate commerce. No question of restrictions on the sale of radio and television rights was involved in those cases. The present case, on the other hand, primarily concerns restrictions imposed by the National Football League on the sale of radio and television rights. Therefore, the present case basically concerns the League's restraint of interstate commerce in the radio and television industries. It is obvious that whether professional football itself is or is not engaged in interstate commerce is immaterial in the present case and that the decisions in the baseball cases referred to do not control the present case.
Findings of Fact.
Article X of the by-laws of the National Football League (as in force since 1951) provides:
The statements of fact contained in the opinion will constitute the Court's findings of fact in the case.
The following of plaintiff's requests for findings of fact are affirmed and adopted as the Court's additional findings of fact in the case: Nos. 1 to 5, inclusive; No. 6, except for the first sentence; Nos. 7 to 17, inclusive; No. 18, except for that part of the first sentence following "In 1951"; No. 19, except for the first sentence which is ambiguous; Nos. 20 to 25, inclusive, Nos. 27 to 35, inclusive.
The following of defendants' requests for findings of fact are affirmed and adopted as the Court's additional findings of fact in the case: No. 1; Nos. 3 to 9, inclusive; Nos. 13 and 14; No. 21, but with "appropriate" underlined; No. 46, with the reservation that it does not state all the purposes of Article X, Nos. 47 to 50, inclusive; No. 53, except for the last sentence; and No. 55.
All the other requests by defendants for findings of fact are denied.
Conclusions of Law.
The statements of law contained in the Opinion will constitute the Court's conclusions of law in the case.
The following of plaintiff's requests for conclusions of law are affirmed and adopted as the Court's additional conclusions of law in the case: Nos. 1 and 5. The others are denied.
The following of defendants' requests for conclusions of law are affirmed and adopted as the Court's additional conclusions of law in the case: Nos. 1, 4, 10, 14 and 18.
All the other requests by defendants for conclusions of law are denied (No. 13 for being ambiguous).
If there are any inconsistencies between the requests which have been affirmed and adopted and the findings of fact and conclusions of law appearing in the Opinion, those contained in the Opinion shall govern.
Accordingly, a decree may be entered dismissing plaintiff's claim for injunctive relief with respect to Article X's restriction on the telecast of outside games into a club's home territory when that club is playing at home, and enjoining the following illegal activities authorized by Article X:
(1) The restriction of the sale of rights for the telecasting of outside games in a club's home territory on a day when the home club is permitting the telecast of its away game in its home territory; (2) All territorial restrictions on the sale of radio broadcasting rights; and (3) The exercise of the Commissioner's power under Article X to disapprove contracts for the purpose of effecting the same two types of illegal restrictions mentioned in this paragraph.
Each side will submit a proposed decree within thirty days of the filing of this Opinion.