## Facts

- Present and former National Football League (NFL) players sued the NFL, its member clubs, and the commissioner challenging restrictions on player movement after contract expiration.
- The challenged restraint, the “Rozelle Rule,” required a club signing a player whose contract had expired to compensate the player’s former club; if clubs could not agree, the commissioner could award compensation (players and/or draft choices) deemed “fair and equitable.”
- Players alleged the open-ended compensation threat deterred clubs from signing free agents, depressing player mobility and bargaining power in the market for professional football services.
- The suit asserted violations of Sherman Act § 1 and sought injunctive relief; some players also sought damages.
- After a lengthy bench trial, the district court held the Rozelle Rule unlawful, rejected a labor-exemption defense, and enjoined its enforcement; damages were deferred.

## Issues

1. Whether the Rozelle Rule was immune from antitrust scrutiny under the nonstatutory labor exemption due to its asserted relationship to collective bargaining.
2. Whether the rule should be condemned as a per se unlawful group boycott/concerted refusal to deal or analyzed under the rule of reason.
3. Whether, under the appropriate standard, the Rozelle Rule unreasonably restrained trade in violation of Sherman Act § 1.

## Decision

- The Eighth Circuit affirmed the judgment that the Rozelle Rule violated Sherman Act § 1 and upheld the injunction against enforcement.
- The court held the Rozelle Rule was not protected by the nonstatutory labor exemption because it was not the product of bona fide arm’s-length collective bargaining.
- The court declined to rest decision on per se illegality and instead applied rule-of-reason analysis to the league’s player-allocation restraint.
- Under the rule of reason, the court found the Rozelle Rule’s restrictions on player mobility and bargaining power substantial and unjustified relative to the NFL’s asserted objectives.

## Legal Principles

- A restraint receives nonstatutory labor-exemption protection only if (1) it primarily affects parties to the collective-bargaining relationship, (2) concerns a mandatory subject of bargaining, and (3) is the product of bona fide, arm’s-length bargaining.
- Professional sports league restraints affecting the labor market may be evaluated under the rule of reason where cooperative league arrangements complicate per se treatment.
- Under Sherman Act § 1’s rule of reason, a restraint is unlawful when its anticompetitive effects in the relevant market are substantial and are not reasonably necessary to achieve legitimate objectives, particularly where less restrictive alternatives are available.
- An open-ended, discretionary compensation regime that materially deters hiring of free agents can constitute an unreasonable restraint by suppressing mobility and salary competition.

## Conclusion

The court held the NFL’s Rozelle Rule was not insulated by the nonstatutory labor exemption and, under rule-of-reason analysis, imposed a substantial and excessive restraint on the market for player services; the injunction against enforcing the rule was affirmed.


Mackey v. Nat’l Football League, 543 F.2d 606 (8th Cir. 1976)