MANHATTAN (CN) — Sports apparel giant Fanatics, the NFL and all 32 of its franchises are being accused of violating antitrust law due to their collective merchandise licensing deals, in a lawsuit filed Friday in Manhattan federal court.
It’s a massive industry — the NFL sells more than $4 billion in merchandise each year — and no one is taking a bigger piece of the pie than Fanatics. With a well-connected frontman and control over the entire value chain, the apparel retailer has exploded in popularity and value over the past several years.
But fans who filed Friday’s lawsuit attribute Fanatics’ success in part to foul play. In their 92-page class action the plaintiffs say Fanatics and the NFL profited from “anticompetitive conduct” by eliminating competing lower-priced merchandise dealers to keep the price of NFL-licensed goods as high as possible.
“Historically, each team competed with itself and other retailers (Fanatics being just one) in the online market for NFL licensed products,” the plaintiffs claim. “For their mutual benefit, defendants — the NFL and its affiliates, each of the 32 Teams that participate in the NFL, and Fanatics, Inc. — conspired to dominate the retail market for online sales of NFL Licensed Products.”
This plot was driven by the NFL’s 2017 purchase of a three percent stake in Fanatics for $95 million, according to the suit.
“This means that as Fanatics’ value increases, so too does the NFL’s investment,” the plaintiffs claim.
The lawsuit was brought by Charles Franz, an Illinois resident who purchased NFL-licensed products on Fanatics using a third-party digital wallet to skirt the terms of service agreement, according to the complaint.
Franz argues that after the NFL bought shares of Fanatics, it started cutting out other online retailers. He claims that sites like Amazon Marketplace, which often sold NFL-licensed products at a lower price than Fanatics did, started to get excluded by the league in what Franz called a “boycott.”
“This boycott eliminated defendants’ competitors who would have charged lower prices for NFL licensed products sold online,” Franz claims. “In so doing, the boycott removed the downward pressure on prices and margins that, absent the conspiracy, would have otherwise flowed directly from enhanced competition.”
While Fanatics was never the exclusive online merchant of NFL-licensed products, Franz says the defendants colluded to thwart competition by “forbidding” other retailers from using NFL-related keywords to “advertise or even describe their product offerings.”
“The effect is to drive consumer traffic to defendants’ retail sites and product listings and away from those of competing retailers,” Franz adds.
This so-called “conspiracy” allows Fanatics, the NFL and all 32 teams to charge “supracompetitive” prices for these licensed goods while sharing the profits among themselves, according to the complaint.
“In a competitive market, each team would compete to sell NFL licensed products to the greatest number of fans — not only to realize profit but as a self-serving marketing tool; fans wearing NFL license[d] products are walking billboards,” Franz says.
Instead, Franz claims that the NFL chose to collude with Fanatics to consolidate both’s market power and make an easy buck in the process.
The suit also claims that Fanatics CEO Michael Rubin’s has routinely used his industry ties and exclusive events to schmooze NFL higher ups and team owners. Franz claims that Rubin “maintains close personal relationships with key members of the NFL” such as New England Patriots owner Robert Kraft.
“It was based on this friendship that Kraft encouraged the NFL to invest in Fanatics in 2017,” Franz claims.
Rubin’s influential friendships, coupled with every teams’ revenue share of their licensed goods, creates “strong financial incentives to collude rather than compete,” according to the lawsuit. Franz argues that Rubin has even admitted to such, himself.
“In public interviews, Rubin has admitted that the size of the licensed sports industry has remained largely constant, but that instead of trying to grow the overall market, "Fanatics’ focus is just on increasing its 'share of the closet,' i.e., taking market share from other retailers,” Franz adds, citing a 2020 interview with Forbes.
Franz defined the lawsuit’s class as anybody who purchased NFL-licensed goods “from Fanatics, any NFL defendant or team,” from 2016 onward. He’s asking the court to bar the defendants from enforcing the “anticompetitive” agreements between the league and the apparel retailer.
The case bears a striking similarity to one filed in 2022, also in Manhattan federal court. A spokesperson for Fanatics told Courthouse News that Friday’s suit is merely a “copy-and-paste job” from the previous suit with a “new plaintiff.”
“This complaint is nothing more than a copy-and-paste job from a previous lawsuit that a federal judge has already tossed out of court," the statement said. "This is a blatant effort by the same lawyers — after having shopped around for a new plaintiff — to try for a second bite at the apple. We intend to vigorously defend against this action and are confident in achieving the same result."
Representatives for the NFL did not immediately respond to requests for comment.
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