Today's Video Game Law Blog, a service of Canadian law firm Davis & Co., LLP, highlights a federal lawsuit in the U.S. District Court for the Northern District of Illinois that holds serious implications for game publishing giant Electronic Arts, the NFL, ESPN, and the NCAA.
In the suit, plaintiff American Needle, Inc. claims that for years it had a non-exclusive license with the NFL to manufacture and sell apparel bearing the logos of the league's football teams. Eventually, the NFL granted an exclusive license to Reebok International, Inc. to sell NFL apparel and headwear.
American Needle filed suit against Reebok and the NFL alleging the defendants violated the Sherman Antitrust Act by illegally restraining trade and attempting to monopolize the market for NFL apparel and headwear. The NFL and Reebok filed a motion to dismiss the suit, but U.S. District Judge James B. Moran ruled that four of American Needle's five complaints could proceed. Moran said that NFL team logos can be viewed as an actual product. While some consumers might purchase a T-shirt or hat with a logo simply because they need such items, he reasoned, most who buy such logo-bearing merchandise are team fans, and would not see alternative apparel as a substitute.
Now, cut and paste the last few paragraphs. Replace "American Needle" with "2K Sports." Replace "Reebok" with "Electronic Arts." Replace "apparel and headwear" with "NFL video games." Sure sounds a lot like the Madden exclusive situation, doesn't it? By the way, in the photo at left, E3 attendees play Madden 2006, the only NFL video game fans can choose for the next five years.
Not to be an "I told you so," but GamePolitics simply can't resist re-running this piece we originally published on April 13th...
As reported on GameSpot and elsewhere, video game publishing giant Electronic Arts has signed an exclusive 6-year deal with the NCAA to publish licensed console games based on college football. The deal comes on the heels of an exclusive 5-year arrangement reached by EA with the NFL last December. For all practical matters, the dual agreements lock up the entire football video game market through the next generation of consoles.
Big losers in the deals include 2K Sports, which made a pretty good $19.99 NFL game for the last couple of years, as well as consumers, who always lose when there is no competition. Without the competitive pressure from a budget-priced NFL 2K6, what are the chances that Madden 2006 will cost a penny less than $49.99?
But does EA's aggressive pursuit of football licensing constitute a monopoly in the legal sense?
An article by attorney Richard Steuer provides a summary of antitrust laws. Steuer's work says, in part:
"Section 2 of the Sherman Act makes it unlawful to monopolize, attempt to monopolize, or conspire to monopolize a line of commerce...the offense of monopolization...has two elements: (1) possession of monopoly power in the relevant market, and (2) willful acquisition or maintenance of that power."
Steuer further notes that "The Supreme Court has defined monopoly power as the power to control prices or exclude competition. As a practical matter, such power is measured by the alleged monopolist's share of the relevant market....any market share of 50 percent or higher is sufficient to be of concern...Once monopoly power is found the question remains: Was it willfully acquired or maintained? ...Conscious acts designed to further or maintain a monopoly market position will suffice -- for example, acquisitions of competitors, exclusive dealing arrangements..."
So, after reading Richard Steuer's article...will someone explain to me how EA's deals are NOT monopolistic? How consumers will not lose out? How jobs will not be lost at competing firms?
Therefore, as of this morning, GamePolitics.com calls upon the United States Department of Justice to initiate an investigation into possible monopolistic actions by Electronic Arts in these matters.