O’Bannon Upheld on Appeal, Kind Of

Posted on by Jake Gordon

Minor NCAA rule infractions occur frequently in college athletics.1 These minor violations generally consist of athletes, coaches and universities violating one of many NCAA regulations. Such violations include coaches holding practice for more hours than the NCAA allows or sending too many text messages to prospective recruits.2 Though some rules may seem arbitrary, the NCAA tries to fulfill its task of creating an infrastructure for the protection of student-athletes participating in Divisions I, II, and III intercollegiate sports.3 The broad questions presented in O’Bannon include: “whether the NCAA’s rules are subject to the antitrust laws and, if so, whether they are an unlawful restraint on trade.”4 More specifically, Edward O’Bannon challenges the rule forbidding “[university athletic] programs from offering monetary compensation to any athlete for his athletic labor or for commercial use of his name, image, and likeness.”5 It is for the courts to decide whether the NCAA, in its pursuit of protecting student athletes, is violating antitrust laws.

Edward O’Bannon, a former NCAA basketball player for UCLA, claims that he is entitled to compensation for the use of his name, image and likeness (NIL) in video games created by EA Sports.6 O’Bannon, originally decided by the U.S. District Court of the Northern District of California in 2010, has been upheld in part and reversed in part by the 9th circuit court on appeal.7 Because the district court held that the NCAA’s compensation rules were subject to antitrust scrutiny, the rules were analyzed pursuant to the “rule of reason.”8

In order for an antitrust plaintiff to be successful, a defendant must be found guilty of an action that is per se anticompetitive, or an action determined to be anticompetitive under what is known as the “rule of reason” standard.9 Under the rule of reason analysis, the defendant’s conduct is weighed against the procompetitive or beneficial aspects of the transaction in question.10 In other words, a court must decide whether the allegedly illegal behavior caused a “significant injury to competition.”11 The NCAA did not protest the notion that their practices restricted the college education market in which college athletes participate. However, the NCAA has long stood by its mantra that its decisions are not subject to antitrust laws as they are non-commercial decisions.12 But, the NCAA participates in a variety of matters and to cast all of their activities as non-commercial seems over inclusive. One example of their commercial activity was the agreement that the NCAA had with Electronic Arts allowing them to produce video games. In conclusion teh court The TheThe Court held that the NCAA engaged in unlawful activity by forcing athletes to sign agreements giving the NCAA and its licensing agents the right to use the player’s image and name in promotions.”13

Many aspects of the 9th Circuit decision echoed the decisions of lower courts, however, the Court of Appeals vacated the portion of the opinion that granted the players the ability to earn up to $5,000 per year in deferred compensation for use of their NILs. The problem did not lie with the number itself, but instead with the methodology behind the number. The number seemed to be based on one former CBS analyst’s claim that he would be uncomfortable with a player earning one million dollars but that he would be less uncomfortable with the players earning $5,000.14

At this point, the NCAA may appeal in the hopes of overturning the current holding and instead obtaining a holding that deems its regulations immune from antitrust laws or the Plaintiff may appeal in order to force the NCAA to create a system of deferred compensation. Whether either or both sides will appeal the decision to the Supreme Court is yet to be seen. Due to the importance of this question, it seems likely that the Supreme Court will examine this issue soon.

  1. Darren Everson & Hannah Karp, The NCAA’s Last Innocents, Wall St. J. (June 22, 2011), http://www.wsj.com/articles/SB10001424052702303936704576400052122863390. ↩

  2. Rodney K. Smith, A Brief History of the National Collegiate Athletic Association’s Role in Regulating Intercollegiate Athletics, 11 Marq. Sports L. Rev. 9 (2000). ↩

  3. Katherine McClelland, Should College Football’s Currency Read “In BCS We Trust” or Is It Just Monopoly Money?: Antitrust Implications of the Bowl Championship Series, 37 Tex. Tech L. Rev. 167, 170 (2004). ↩

  4. O’Bannon v. Nat’l Collegiate Athletic Ass’n, No. 14-16601, 2015 WL 5712106, at *1 (9th Cir. Sept. 30, 2015). ↩

  5. Ralph Gerstein & Lois Gerstein, Prosecution or Defense of Antitrust Actions Relating to College or Professional Sports, 117 Am. Jur. Proof of Facts 3d 391 (Originally published in 2010). ↩

  6. Id. ↩

  7. O’Bannon, 2015 WL 5712106, at *1. ↩

  8. Id. ↩

  9. See 50A N.J. Practical Business Law Deskbook § 23:9 (describing under per se analysis, plaintiff need prove only the existence of an illegal agreement and defendant’s anticompetitive intent for liability to attach; anticompetitive effect is presumed. ↩

  10. Id. ↩

  11. Tanaka v. Univ. of S. Cal., 252 F.3d 1059, 1063 (9th Cir. 2001); See O’Bannon, 2015 WL 5712106, at *18 Stating takes of this decision. ust Actions Relating to College or Professional Sportsven the enormous stakes of this decision. (“The NCAA makes three modest arguments about why the compensation rules do not have a significant anticompetitive effect. First, it argues that because the plaintiffs never showed that the rules reduce output in the college education market, the plaintiffs did not meet their burden of showing a significant anticompetitive effect. Second, it argues that the rules have no anticompetitive effect because schools would not pay student-athletes anything for their NIL rights in any event, given that those rights are worth nothing. And finally, the NCAA argues that even if the district court was right that schools would pay student-athletes for their NIL rights, any such payments would be small, which means that the compensation rules’ anticompetitive effects cannot be considered significant.”). ↩

  12. O’Bannon, 2015 WL 5712106, at *9. ↩

  13. O’Bannon, 2015 WL 5712106, at *18. ↩

  14. O’Bannon, 2015 WL 5712106, at *25. ↩

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