Ten Things to Know About the NCAA / O’Bannon Antitrust Case

In a landmark ruling for college athletes, US District Judge Claudia Wilken ruled that the National Collegiate Athletic Association (NCAA) cannot stop players from selling the rights to their names, images, and likenesses to the schools that they attend. The decision struck down NCAA regulations that prohibit players from receiving anything other than scholarships and the cost of attendance at their schools, holding that such regulations unreasonably restrain trade. O’Bannon v. NCAA (N.D. Cal. Aug. 8, 2014).

The case arose in 2009, when former University of California, Los Angeles (UCLA) basketball star Ed O’Bannon and 19 other former college athletes sued the NCAA, claiming that various NCAA regulations violated antitrust laws insofar as they reflected a conspiracy in restraint of trade among Division I schools and the conferences of which those schools are members, such as the Big Ten, the Pac-12, and the ACC. The lawsuit alleged that the regulations were aimed at blocking the athletes from receiving a share of the revenues that the NCAA, the schools, and the conferences generated from the use of the athletes’ images in television broadcasts and video games. O’Bannon, who was MVP of the 1995 UCLA national championship basketball team, said he signed on as lead plaintiff after seeing his image in a video game authorized by the NCAA for which he received no compensation.

The Trial

As written about in prior Arent Fox alerts (click here and here to read them), after years of discovery and other pretrial proceedings, the case proceeded to trial before Judge Wilken in June. The litigation centered on federal antitrust law and whether the prohibition against paying players promotes the game and does not restrain competition in the marketplace.

Several players testified during the trial that, while in college, they viewed playing sports as their full-time occupation, and that the numerous hours they devoted to playing sports made it impossible to function like a regular student. O’Bannon testified that his “job” at UCLA was to play basketball and that it took up so much time that just making it to class was difficult. He claimed, as many others did, that he was “an athlete masquerading as a student,” and that he was at UCLA strictly to play basketball.

Witnesses called by the NCAA during the trial testified that athletes received an education as payment for their services. The NCAA also put forth testimony that its economic model had worked for more than a century, and that paying players would make college sports less popular. The NCAA also put forth evidence that striking down the restrictions could force schools to cut other programs funded by the hundreds of millions of dollars generated by the football and basketball programs at many Division I schools.

The Judge’s Decision

In a 99-page opinion, Judge Wilken sided with the players. Wilken rejected the NCAA’s arguments in defense of its economic model, concluding that the “justifications that the NCAA offers do not justify this restraint and could be achieved through less restrictive means” while preserving college sports competition. Here are the top 10 things to know about the case and the decision:
 

1. The ruling only applies to athletes who participate in football at Football Bowl Subdivision (FBS) Division I schools or who participate in basketball at all Division I schools. Athletes who participate in any other sport at any other level are unaffected by the ruling.
    

2. Student-athletes may not go out and sell their names and likenesses to the highest bidder. But the ruling prevents the NCAA “from enforcing any rules or bylaws that would prohibit its member schools and conferences from offering their FBS football or Division I basketball recruits a limited share of the revenues generated from the use of their names, images, and likenesses in addition to a full grant-in-aid.”
    

3. Judge Wilken said that the NCAA could set a cap on what schools could pay athletes at $5,000 a year for covered football and basketball players. That would, at a maximum, amount to $20,000 per athlete over a four-year college career, which amount would be placed in a trust for the student-athlete.
    

4. The money collected on behalf of an athlete that is put into the trust is only available to the athlete after he or she is finished competing in college athletics.
    

5. If the applicable school does not use a player’s name, image, or likenesses, there would be no money placed in trust and an athlete would be limited to receiving a cost-of-attendance scholarship.
    

6. The decision by itself does not usher in an era of pay-for-play or endorsement deals for athletes. While the athletes are students, they can receive only a scholarship covering the full cost of attending college.
    

7. The NCAA can still set rules governing eligibility, the number of scholarships a school may offer, and practice guidelines and retains the power to prevent athletes from signing endorsement deals.
    

8. The NCAA’s response to the holding is unclear. The NCAA will likely appeal the ruling (it has previously said it would take the case to the Supreme Court if it lost), and has given no indication that it is eager to embrace any form of payment to athletes that will change the way it does business.
    

9. The changes will not be stayed while the NCAA appeals; the next recruiting cycle is likely to be the one affected. That means athletes who enroll in colleges on or after July 1, 2016 will be subject to the ruling.
    

10. The NCAA still faces consequences from other major lawsuits — the Northwestern football player’s unionization case (click here to read about it), and a pair of lawsuits alleging that the NCAA and the five largest football conferences conspired to limit the value of scholarships to less than the actual cost of attendance (Jenkins v. NCAA and Alston v. NCAA). If the plaintiffs in those cases are successful, it could have a far greater impact on the NCAA’s model than the O’Bannon case.
     

Arent Fox’s Sports group will continue to monitor the developments surrounding this case and the outstanding cases against the NCAA. If you have any questions about this alert, please contact Richard L. Brand or the Arent Fox professional who handles your matters.