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From Antitrust Law Daily, May 13, 2014

NCAA unable to resurrect rejected justification in student-athlete compensation case

By Jeffrey May, J.D.

The National Collegiate Athletic Association (NCAA) will not be permitted to argue in an upcoming antitrust trial that the provision of financial support to women’s sports and less prominent men’s sports justified the NCAA’s restrictions on compensation for student-athletes on Division I men's football or basketball teams. The federal district court in Oakland, California, will not reconsider a recently-issued summary judgment order to the extent the decision held that the support for these sports was “not a legitimate procompetitive justification” for the challenged restraints on complaining current and former college athletes. The NCAA’s request for leave to file a motion for reconsideration was denied (In re NCAA Student-Athlete Name & Likeness Licensing Litigation, May 12, 2014, Wilken, C.).

On April 11, 2014, the court issued an order, granting in part and denying in part the complaining student-athletes’ motion for summary judgment and denying the NCAA’s motion for summary judgment. Specifically, the court found that fact issues precluded summary judgment to either party with respect to four of the NCAA's five asserted procompetitive justifications for its rules prohibiting student-athletes from receiving compensation for the use of their names, images, and likenesses. However, the court granted summary judgment to the plaintiffs with respect to the NCAA’s fourth justification—that the alleged restraint increased NCAA member schools’ athletic budgets and, therefore, enabled them to provide greater financial support to women’s sports and less prominent men’s sports. The court refused to validate a practice that restrained trade even if it had unrelated benefits to competition in another market. It went on to explain that the NCAA could support women’s sports and less prominent men’s sports through less restrictive means, and it offered a few suggestions.

In seeking leave to move for reconsideration, the NCAA argued that the court failed to consider controlling legal authority and material facts concerning (1) the scope of the “college education” market and (2) the nonexistence of less restrictive alternatives.

The court rejected the NCAA's argument that it erred in treating Division I men’s football and basketball recruits as the only consumers in the alleged college education market. The plaintiffs maintained that the NCAA “restrains competition in the [college education] market by preventing Division I schools from offering their recruits a portion of the revenue they receive from football-and basketball-related broadcasting and videogame licenses.” The rule allegedly deprived Division I schools “of a tool that they could otherwise use to recruit the top student-athletes,” and deprives student-athletes of compensation that they would otherwise receive in an unrestrained market.

“Although the NCAA has presented evidence of a general market for higher education, Antitrust Plaintiffs’ claims focus only on a specific part of that market,” the court explained. “Antitrust Plaintiffs have presented sufficient evidence to suggest that there is a specific college education market for Division I men’s football and basketball recruits.”

Thus, the court did not fail to consider other consumers in the market, including “other Division I [student-athletes] and other college-bound students,” as the NCAA argued. The NCAA had not presented sufficient evidence to support an inference that the relevant market included consumers other than Division I men’s football and basketball recruits. Nothing in the report of the defendant's expert economist or in the declarations submitted by university administrators, athletic directors, or conference executives justified the NCAA’s request for leave to seek reconsideration, it was noted.

Less restrictive alternatives. Moreover, the court was not swayed by declarations from university administrators and athletic directors that were intended to support an inference that the NCAA lacks less restrictive alternatives for promoting women’s sports or less prominent men’s sports. The court had pointed out that, rather than limiting student-athlete compensation, the NCAA could simply require its member conferences to redistribute revenue generated by Division I men’s football and basketball to women’s sports and less prominent men’s sports.

Although the school officials asserted that Title IX made it difficult for universities and conferences to redistribute revenue from men’s sports to women’s sports, the NCAA could still require its member conferences to redistribute their Division I football and basketball revenue to less prominent men’s sports. Further, suggestions that Title IX prevented Division I schools and conferences from redistributing revenue from men’s football and basketball to women’s sports undermined the NCAA’s own argument that restrictions on student-athlete compensation made it easier for schools to redistribute funding to women’s sports and less prominent men’s sports, according to the court.

Trial in the case is set to begin next month.

The case is No. C 09-1967 CW.

Attorneys: Shana E. Scarlett (Hagens Berman Sobol Shapiro LLP) for Samuel Michael Keller. Glenn Douglas Pomerantz (Munger Tolles & Olson) and Juan Carlos Araneda (Meckler Bulger Tilson Marick & Pearson LLP) for National Collegiate Athletic Assn.

Companies: National Collegiate Athletic Assn.

MainStory: TopStory Antitrust CaliforniaNews

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