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From Antitrust Law Daily, November 24, 2014

Three amici curiae groups seek reversal of O’Bannon decision finding NCAA restrains trade

By Peter Reap, J.D., LL.M.

On Friday, three separate groups of amici curiae filed briefs with the U.S. Court of Appeals in San Francisco, expressing their concerns over the federal district court in Oakland’s decision enjoining the National Collegiate Athletic Association (NCAA) from enforcing its prohibition on student-athlete compensation for the use of their names, images, and likenesses in television broadcasts and video games.

The three amici curiae groups that filed the briefs are: (1) four law, economics and antitrust professors; (2) several television and radio broadcasting companies, along with a committee of reporters; and (3) three associations of colleges and universities. Essentially, they argued that the district court erred in finding a restraint of trade based on a property right (the student-athletes’ right of publicity) that does not exist under state law, and that the injunction was rooted in a misunderstanding of intercollegiate athletics.

Background. A group of current and former student-athletes who played on men’s football or basketball teams at Division I member schools and conferences filed suit against the NCAA, alleging that the NCAA violated federal antitrust law by conspiring with licensing companies, Electronic Arts Inc. and Collegiate Licensing Company, to restrain competition in two related national markets—the college education market and the group licensing market—for the commercial use of their names, images, and likenesses in television broadcasts and NCAA brand video games.

In particular, the plaintiffs challenged NCAA rules that bar student-athletes from receiving a share of the revenue the NCAA and member schools earn from the sale of those licenses. In April 2014, the district court granted the plaintiffs’ motion for summary judgment on their antitrust claims against the NCAA and set their damages claims for a bench trial. In June 2014, the plaintiffs agreed to dismiss their individual damages in a stipulation and proceeded with their claims for declaratory and injunctive relief.

The district court decision. Because Division 1 schools are the only suppliers in the relevant market in which NCAA Division I schools compete to offer top recruits the opportunity to earn a higher education, they have the power, when acting in concert through the NCAA and its conferences, to fix the price of their product, the district court decided. Their price-fixing agreement constituted a restraint of trade since it was clear from the evidence at trial that certain schools would compete for recruits absent this agreement. The NCAA’s contention that its rules do not amount to price fixing because most college athletes actually pay at or close to zero due to their athletic scholarships was rejected. Student-athletes provide the schools with the significant value of their athletic services and rights to use their names, images, and likenesses while they are enrolled, the court found.

The NCAA was enjoined from enforcing rules that prohibit its member schools and conferences from (1) offering Division I football and basketball recruits a limited share of the revenues generated from the use of their names, images, and likenesses in addition to a grant-in-aid; (2) offering to deposit that share in trust payable when the recruit leaves school or eligibility expires; and (3) setting a cap of less than five thousand dollars annually on the amount of money held in trust. The injunction, which was not stayed pending appeal, would not preclude the NCAA from enforcing other existing rules designed to achieve legitimate pro-competitive goals, such as the prohibition against endorsing commercial products and limits on the number of scholarships awarded.

The economics and antitrust professors’ view. In their brief, the economics and antitrust professors argued that an antitrust claim cannot be premised on a restraint of an alleged property right—the student-athletes’ right to publicity in the use of their names, images, and likenesses in live game broadcasts and archival game footage—that has never been legally recognized. No federal or state court has recognized such a property right, and, there was no economic justification for creating such a right in this case, the professors asserted.

Further, the district court erred in basing its holding on what would have happened in an “unrestrained” market when the restraint was integral to creating the unique product. The district court “ignored a key antitrust principle: If the joint venture’s restraint is necessary to create the product, and the product increases output, consumer choice, and consumers’ ability to satisfy their preferences, then the product presumptively increases consumer welfare and is presumptively lawful under antitrust’s rule of reason.”

Finally, the professors contended that the district court’s reasoning would expose high schools and universities to potential widespread antitrust liability and thereby chill procompetitive activity to society’s detriment.

The broadcasters’ view. The brief put forth by the broadcasters began, like that of the professors, with the argument that the district court’s premise, that each participant in a team sporting event, or any public entertainment event, has a right of publicity to control whether he or she may be depicted or even mentioned in any broadcast of the event, was simply wrong. If each of the participants had the exclusive right to control the broadcast of their name, image, or likeness, then no broadcaster could readily be certain that it had the right to broadcast the event.

The broadcasters also argued that the First Amendment would bar the recognition of a right of publicity for participants in a game broadcast. The district court emphasized that the proprietary right at issue functioned much like copyright law, which incentivizes the creation of expressive works by authorizing their creators to exclusively license them to a single publisher. There was no evidence or logic, however, supporting the notion that the recognition of publicity rights for every individual performer was necessary to induce athletes to play sports, or cheerleaders to lead pep rallies, or the marching band to perform at halftime, the broadcasters stated. Indeed that was counterintuitive.

The collegiate associations’ view. The district court’s analysis hinged on a view of intercollegiate athletics at odds with education and the basic reason colleges and universities exist, the collegiate associations pointed out in their brief. To the district court, intercollegiate athletics was little more than a side-business. To the contrary, intercollegiate athletics was an educational opportunity colleges and universities provide in which some students participate as part of their higher education. Moreover, amateurism guards that purpose.

The district court’s injunction would make amateur student-athletes paid professionals, the associations alleged. The injunction would weaken education and ultimately, amateurism would fail if the injunction was allowed to stand.

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