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Case to Watch: O’Bannon v. NCAA

On June 27, the trial in O’Bannon v. NCAA concluded following 15 days of testimony. Plaintiffs in this case, former college athletes, including former UCLA basketball player Ed O’Bannon, originally filed in the Northern District of California in 2009.  They have challenged the NCAA’s longstanding ban on paying licensing fees to college athletes for the use of their names and images in commercial outlets like broadcasts, merchandise, and video games, asserting that this policy constitutes an anti-competitive restraint of trade devoid of any pro-competitive benefits.

Trial in O’Bannon concluded with many significant issues left up in the air. Judge Claudia Wilken expressed uncertainty, for example, as to the relevant market in this case. The plaintiffs have defined the relevant markets as the “higher education services market,” in which colleges and universities compete to recruit the best student-athletes, and the “collegiate licensing market,” in which parties acquire the rights from the NCAA to use the images of college athletes, including in broadcasts and videogames.  Judge Wilken also questioned the parties about less-restrictive alternatives that may achieve the NCAA’s stated goal of maintaining “amateurism” in college sports.

As Judge Wilken’s questions of the parties’ attorneys at the close of trial demonstrated, this case does not fit seamlessly into traditional antitrust law theories – although O’Bannon has accused the NCAA of being essentially a “cartel,” the concepts of “buyer,” “seller,” “market,” and “competitive harm” are not necessarily easily applied to the issues at play here. The parties have submitted post-trial briefs presenting their views on these disputes, and Judge Wilken has expressed an intent to issue a ruling in August.

This case is certainly one to watch – and not only because Judge Wilken will be deciding unique questions of competition law. Whichever way she rules –granting the student-athletes’ request that they be permitted to negotiate compensation for use of their likenesses, allowing the current structure of the NCAA to carry on, or some “less restrictive” alternative in between – this case will impact the on-going business of college sports.

The system is already responding to the activism of student-athletes. In the Northern District of California, video game company Electronic Arts Inc. has agreed to pay $40 million and the NCAA has agreed to pay $20 million to college athletes to settle a lawsuit claiming athletes’ likenesses were used in video games without their permission.

The NCAA’s use of student-athlete names and images is not the only practice being challenged. On March 5, 2014, a former West Virginia football player sued the NCAA and five “power” conferences (the Atlantic Coast, Big Ten, Big 12, Pac-12, and Southeastern) on behalf of all scholarship football players since February 2010. Plaintiff in Alston v. NCAA et al. alleges that the scholarship cap imposed by the NCAA and power conferences means that “full” scholarships do not cover the full cost of attending school, forcing many players to work (in addition to their considerable commitment of time and energy to football) in order to make ends meet. This arrangement is harmful and anti-competitive, the complaint alleges, because it restricts financial aid to a lower level than it would be in a competitive market, and prevents colleges and universities from competing for the best players with favorable financial aid terms. In June, this lawsuit was consolidated with another antitrust case, from the District of New Jersey, also challenging the NCAA scholarship caps.

Anyone who has attended a Division I university or joined an office March Madness pool knows that college athletics are a big business. Now, the long-standing structure of that business is under fire, in cases like O’Bannon and Alston, by student-athletes who want what they see as their fair share. These cases are not the first of their kind, and they will certain not be last. It is likely that litigation against the NCAA will continue, absent a fundamental change in the NCAA’s approach to the status of student-athletes.