Buffalo Grove firm could change way NFL does business

A third-generation, family-owned company in Buffalo Grove knows the value of teamwork.

But the 92-year-old American Needle Inc., which makes hats and other merchandise for companies and sports teams, doesn't think that same spirit was present in the National Football League when it came to marketing products.

The longtime Buffalo Grove company, which made licensed merchandise for the NFL, was knocked off the field when the league awarded an exclusive licensing deal to Reebok International Ltd. That forced American Needle to take on the Goliath NFL and sue on antitrust grounds. On Wednesday, the case reached the U.S. Supreme Court in Washington, D.C., where the Kronenberger family and their lawyers presented their argument.

"We didn't expect this when we filed the lawsuit," the company's General Counsel Jeff Carey told the Daily Herald. "I knew it would be a big fight against the NFL and the teams. They're big and powerful. ... One way or another, this will have a big effect on how they do business."

American Needle was founded on Chicago's Northwest Side in 1918 by Ike Kronenberger, who later handed it down to his son, Bruce Kronenberger. The company made visors for newspaper editors and others, as well as baseball replica hats after World War II. By the 1950s, the company began license agreements with the NFL teams, eventually handling merchandise for all the teams.

When Bruce Kronenberger died in the 1980s, his sons took over. Robert Kronenberger of Deerfield is president and brother Ron of Buffalo Grove is vice president.

The company moved a couple of times, finally settling its headquarters in Buffalo Grove in the 1990s. During its heyday, it had about 400 workers, but overseas competition made its impact and the company eventual streamlined to about 50 workers in Buffalo Grove and about 20 in a downstate Illinois facility, Carey said.

American Needle had been one of many companies that made NFL headgear until the league awarded an exclusive contract to Reebok in 2001.

"It's very competitive," said Carey. "But not only did American Needle compete, but it helped to keep prices low for consumers. Now Reebok can set its own prices."

The NFL business had been about 25 percent of sales for American Needle. After that loss, American Needle was forced to look for other revenue streams. It continued to produce for other sports and eventually started a new clothing brand called Red Jacket, carried online and in department stores and sporting outlets, Carey said.

In 2004, American Needle filed a lawsuit against the NFL, claiming the Reebok deal violated antitrust law. But the lower courts were not kind, throwing out the case and holding that nothing in antitrust law prohibits NFL teams from cooperating on apparel licensing so the league can compete against other forms of entertainment.

American Needle now wants the lawsuit restored in the lower courts, while the NFL wants the Supreme Court to uphold the lower court's decision that it can be considered a single entity and apply it around the nation.

A Chicago antitrust expert believes some good could come of this case, and the Supreme Court could have three choices. First, the court could say the league and its members are a single entity and everything they do is immune from the ant-trust laws. Second, it could say the league is never a single entity, in which case, everything its members did collectively would be subject to being challenged by the law and some things could survive a challenge while others would not. And third, and an impractical choice, Jacobs said, is the court could say that sometimes the league is a single entity and sometimes it is not, depending on what it's doing.

At the Supreme Court on Wednesday, justices seemed skeptical.

"You are seeking through this ruling what you haven't gotten from Congress: an absolute bar to an antitrust claim," Justice Sonia Sotomayor told NFL lawyers.

NFL lawyer Gregg H. Levy said as "long as the NFL clubs are members of a unit; if they compete as a unit in the entertainment marketplace ... they should be deemed a single entity" and not subject to antitrust law.

"The question is: Should they be permitted to join their centers of economic power into one when they promote and sell their T-shirts, sweatshirts, et cetera?" Justice Stephen Breyer said.

Another American Needle lawyer, Glen D. Nager, under prompting from Justice Ruth Bader Ginsburg told the court the company believes everything that "these 32 separately owned and controlled teams joined together do in concert, by agreement, by consent" should be subject to antitrust investigation.

Several justices wondered whether the antitrust investigation could stretch to the rules of the game and scheduling, "things that it just seems odd to subject," to antitrust investigation, Chief Justice John Roberts said.

Levy argued that the licensing and selling of NFL apparel is something the league does to promote the sport as a whole, something Justice Antonin Scalia disagreed with.

"The purpose is to make money," Scalia said. "I don't think that they care whether the sale of the helmet or the T-shirt promotes the game. They sell it to make money from the sale."

If the court rules broadly for the NFL, it could shield professional sports leagues from antitrust claims in several areas, including player salaries, location of teams, video-game rights and television broadcasting rights.

The court is expected to hold a conference on the case on Friday, and may take an initial vote. Next week, one of the justices could be assigned to write the opinion, which could be issued any time in the next few months, said Carey.

Jesse J. Holland, Associated Press writer, contributed to this story.