In the first sports antitrust appellate decision since the Supreme Court’s ruling in American Needle, a Third Circuit panel affirmed the jury verdict in Deutscher Tennis Bund (German Tennis Federation) et al. v. ATP Tour, Inc. et al.
The ATP Tour operates a worldwide men’s professional tennis tour including over sixty tournaments categorized into three tiers. The Tour sought to restructure itself to compete more effectively for fans, sponsors and programming revenues. The restructuring was intended to make the annual championship race more compelling, to better ensure top player participation at the highest tier events, to enhance the value of media rights and to expand in the Far East.
Pursuant to the restructuring, ATP reassigned the annual Hamburg Germany event from its top tier to its second tier. That event’s owners, the German and Qatar Tennis Federations, sued based on Sections 1 and 2 of the Sherman Act. A jury found that the Federations failed to prove that the ATP contracted, combined or conspired with any separate entity under Section 1, and that they failed to prove a relevant antitrust market under Section 2.
The Federations appealed the Section 1 verdict, claiming that the District Court erred by instructing the jury that entities that “are commonly controlled or substantially integrated in their operations … may be considered a ‘single entity’ or ‘single enterprise’ under the antitrust laws.” The Federations also claimed that the District Court should have instructed the jury to analyze the Section 1 allegations under a “quick look” mode of analysis and thus relieve the Federations of the need to prove a relevant market or harm to competition.
Quick-look analysis applies to conduct such that “an observer with even a rudimentary understanding of economics could conclude that the arrangements in question would have an anticompetitive effect … .” Anticompetitive effects are presumed. If defendants articulate procompetitive justifications for their conduct, the presumption is dropped and the analysis proceeds using a rule of reason. The panel found that it would have been speculative to presume that there were any anticompetitive effects. Moreover, the ATP Tour’s procompetitive justifications further mandated a full rule of reason inquiry. As both the Section 1 and Section 2 claims concerned the identical purported relevant market, the Federations’ failure to prove a relevant market for purposes of its Section 2 claim necessarily meant that its Section 1 claim must also fail.