Baltimore Ravens. Photo: Keith Allison via Wikimedia Commons

A federal appeals court reinstated a class action alleging the National Football League and DirecTV conspired to monopolize the market for live television broadcasts of professional football games through their “Sunday Ticket” subscription package.

On Tuesday, the U.S. Court of Appeals for the Ninth Circuit reversed dismissal of the case, adopting a different view that the case was akin to the U.S. Supreme Court’s 1984 decision in National Collegiate Athletic Association v. Board of Regents, which held that the NCAA had violated antitrust laws by restricting the output of its broadcast games.

“Here, the interlocking agreements impose similar restrictions,” wrote Judge Sandra Ikuta of the U.S. Court of Appeals for the Ninth Circuit. “Because the complaint alleges that the interlocking agreements in this case involve the same sorts of restrictions that NCAA concluded constituted an injury to competition, we likewise conclude that the complaint plausibly alleges an injury to competition.”

Marc Seltzer, a partner in the Los Angeles office of Susman Godfrey, said in an emailed statement, “We are very pleased by the Ninth Circuit’s decision. We look forward to the next phase of the litigation.”

Gregg Levy, a partner at Covington & Burling in Washington, D.C., who represents the NFL, did not respond to a request for comment.

The lawsuit is among several cases tackling how sports leagues and satellite and cable providers sell out-of-market games through bundled packages available on televisions, computers or other electronic devices.

Unlike other sports, the “Sunday Ticket” package is exclusive. A significant part of AT&T Inc.’s $48.5 billion merger with DirecTV, which the Federal Communications Commission approved in 2015, the “Sunday Ticket” offers football fans an opportunity to view games outside their local broadcast area by signing up to DirecTV. Residential consumers pay about $252 per year, while rates for commercial businesses, like restaurants and sports bars, range from $2,314 to $120,000 a year.

Those rates are excessive, according to the plaintiffs, to both consumers and commercial businesses, who brought a consolidated class action alleging that the arrangement restricts competition in violation of the federal Sherman Antitrust Act.

In addition to Levy at Covington & Burling, NFL brought in Beth Wilkinson of Wilkinson Walsh + Eskovitz for the case. Kirkland & Ellis represented DirecTV, which pushed to send the cases into arbitration.

In 2017, U.S. District Judge Beverly Reid O’Connell of the Central District of California dismissed the case and denied DirecTV’s arbitration motion as moot.

She divided the case into two: a horizontal agreement between the NFL teams to pool their broadcasting rights and a vertical agreement between the NFL and DirecTV to sell those rights.

O’Connell upheld the horizontal arrangement because, without pooling the teams, there would be no way to broadcast game footage and, in any event, plaintiffs lacked standing since they did not purchase the Sunday Ticket package from the NFL. As to the vertical arrangement, she found that the exclusive deal with DirecTV did not reduce output—the total number of broadcast football games.

The Ninth Circuit, in its ruling, disagreed, finding that both agreements worked in tandem.

In citing the NCAA decision, the panel questioned why the NFL failed to cite the Sports Broadcasting Act, passed by Congress in 1961 to address an injunction ordered by U.S. District Judge Alan Grim of the Eastern District of Pennsylvania against the NFL. Grimm found the league’s arrangement requiring that its individual teams must negotiate as a single group over broadcasting rights violated the Sherman Act.

“In this case, the plaintiffs’ allegations on their face adequately allege an injury to competition,” Ikuta wrote. “This is the exact type of arrangement that Judge Grimm concluded violated the Sherman Act—and, more importantly, that the Supreme Court held caused an injury to competition in the context of college football.”

Judge N. Randy Smith of the U.S. Court of Appeals for the Ninth Circuit partially dissented as to the majority’s separate finding that plaintiffs had standing to sue. The majority had cited an exception to the “direct purchaser rule” in the Supreme Court’s 1977 decision in Illinois Brick v. Illinois, which generally found indirect purchasers had no standing to bring antitrust claims over costs passed down to them.

Smith found that exception did not apply to the NFL case.

“In other words, to conclude that plaintiffs have anti-trust standing, we must create a new exception to the Illinois Brick rule,” he wrote. “The Supreme Court has instructed us not to do so.”