On Aug. 8, 2014, Judge Claudia Wilken of the U.S. District Court for the Northern District of California issued a post-trial order that the National Collegiate Athletic Association (NCAA) violated Section 1 of the Sherman Antitrust by adopting rules that bar student-athletes from receiving a share of revenue that the NCAA and its member schools earn from the sale of licenses to use the student-athletes' names, images and likeness. Edward O'Bannon et al. v. NCAA, et al., No. C 09-3329, 2014 U.S. District LEXIS 110036 (N.D. Cal. Aug. 8, 2014).
The NCAA is an association of 1,100 colleges and universities that regulates intercollegiate athletic competition in about two dozen sports. It issues rules that establish academic eligibility requirements for student-athletes, sets forth guidelines and restrictions for recruiting high school athletes, and imposes limits on the number and size of athletic scholarships that each school may provide. The NCAA has three divisions based on the number and quality of opportunities schools can provide, including the financial aid provided to student-athletes. The NCAA imposes rules that bar schools from sharing with student-athletes revenue earned from selling licensing rights to use the student-athletes names, likenesses and images.
Plaintiffs in the O'Bannon case challenged these rules with respect to current and former student-athletes who played on certain Division I football (FBS football) and Division I men's basketball teams. The plaintiffs claimed that the challenged NCAA rules violate Section 1 of the Sherman Act. The NCAA asserted that its restrictions on student-athlete compensation are necessary to uphold its educational mission and to protect the popularity of college athletics.
After a three-week bench trial, the court ruled that the challenged NCAA rules unreasonably restrain trade in violation of Section 1, because they restrain price competition among the FBS football and Division I basketball schools for the educational and athletic opportunities that football and basketball student-athletes seek. The court also concluded that the rules restrain trade in the market where the schools compete to acquire recruits' athletic services and licensing rights.
The court rejected the NCAA's arguments that the rules promote competition and balance among FBS football and Division I basketball teams, that they produce a competitive balance necessary to sustain consumer demand for FBA football and Division I basketball, and that they increase the NCAA's output of Division I schools, student-athletes, or football or basketball games. In addition, it concluded there are less restrictive means of achieving the benefits the NCAA claimed from the challenged rules.
The court issued an injunction that prohibits the NCAA from 1) prohibiting the inclusion of compensation for the licensing of a student-athlete's name, image and likeness in the award of a full grant-in-aid, and 2) prohibiting deferred compensation in an amount of $5,000 per year for such licenses though a trust fund payable upon expiration of athletic eligibility or graduation, whichever comes first.
The NCAA has appealed to the 9th U.S. Circuit Court of Appeals, which agreed to hear the appeal on an expedited basis.
A copy of the decision is available here, and a copy of the injunction is available here.
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