O'Bannon v. National Collegiate Athletic Ass'n
2014 U.S. Dist. LEXIS 110036
N.D. Cal.2014Background
- Plaintiffs (current and former Division I men’s basketball and FBS football players) sued the NCAA alleging its rules bar student‑athletes from receiving compensation (beyond scholarships) for licensing their names, images, and likenesses (NIL), seeking a classwide antitrust remedy under §1 of the Sherman Act. A bench trial was held and the Court found for plaintiffs.
- The NCAA is a joint governance body of ~1,100 schools; Division I (and within it FBS/FCS) schools compete to recruit elite athletes by offering scholarship bundles (tuition, room/board, academic support, coaching, exposure).
- Plaintiffs defined two relevant markets: (1) a college education market (schools selling the bundle to recruits) and (2) a group licensing market with three submarkets (live telecasts, videogames, archival footage). Expert and documentary evidence supported distinctiveness of Division I/FBS offerings and demand for group licensing rights.
- NCAA rules cap athletics-based financial aid at a full grant‑in‑aid and prohibit compensation tied to athletic ability or NIL while enrolled; exceeding limits risks loss of eligibility.
- The Court concluded these NCAA rules function as a horizontal agreement among schools to suppress price competition for recruits (or alternatively as a buyers’ monopsony), harming competition in the college education/input (recruit) market, and that the NCAA’s asserted procompetitive justifications (amateurism, competitive balance, integration of academics and athletics, increased output) do not justify the restraint and are achievable by less‑restrictive means.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether NCAA rules that bar NIL compensation unreasonably restrain trade under §1 (rule of reason) | Rules are an agreement among schools to fix price (suppress scholarship value and bar NIL pay), harming recruits (and the market for their services/licensing rights) | Rules are necessary to preserve amateurism, competitive balance, integration of academics/athletics, and output; they do not unlawfully restrain trade or can be justified | Court: restraint is unreasonable under rule of reason — NCAA fixes price/creates monopsony power; procompetitive claims largely fail or are achievable by less restrictive means |
| Proper relevant market(s) | College education market (schools selling combined education+athletics to elite recruits) and group licensing market (licenses for NIL in telecasts, videogames, archival uses) | NCAA argued broader alternatives exist (other divisions, pro leagues) so market definition too narrow | Court: Plaintiffs proved relevant college education market and group licensing submarkets (but anticompetitive effect shown only in college education/recruit market) |
| Whether NCAA’s procompetitive justifications (amateurism, competitive balance, integration, output) validate the restraint | Even if some goals are legitimate, NCAA’s rules are overbroad; limited measures (stipends, trusts) could preserve goals | NCAA: restrictions preserve product quality (amateurism), maintain competitive balance and output, integrate academics and athletics | Court: evidence does not show rules are necessary; amateurism and integration at most justify limited restrictions; competitive balance and output not supported |
| Availability of less restrictive alternatives | Allow stipends up to cost of attendance; permit limited, equal deferred payments (trusts) funded from licensing revenue; endorse bans may remain | NCAA argued alternatives impractical or undermine amateurism; cited consumer opposition and policy concerns | Court: less restrictive alternatives are feasible and adequate — raise grant‑in‑aid to cost of attendance and allow modest trusts (minimum $5,000/year cap stated) |
Key Cases Cited
- Tanaka v. Univ. of S. Cal., 252 F.3d 1059 (9th Cir. 2001) (rule of reason framework; antitrust elements under §1)
- Hairston v. Pacific 10 Conference, 101 F.3d 1315 (9th Cir. 1996) (rule of reason and sports‑league restraints)
- American Needle, Inc. v. Nat’l Football League, 560 U.S. 183 (2010) (joint venture/league conduct analyzed under rule of reason)
- NCAA v. Board of Regents of Univ. of Oklahoma, 468 U.S. 85 (1984) (scope of NCAA rule of reason analysis; television rights context distinguished)
- United States v. Socony‑Vacuum Oil Co., 310 U.S. 150 (1940) (price‑fixing per se principles; indirect price restraints may be equivalent)
- Catalano, Inc. v. Target Sales, Inc., 446 U.S. 643 (1980) (termination of discounts/credit terms can constitute price fixing)
- Agnew v. NCAA, 683 F.3d 328 (7th Cir. 2012) (recognizing student‑athlete transactions can form an antitrust market)
- Mandeville Island Farms v. Am. Crystal Sugar Co., 334 U.S. 219 (1948) (buyers’ cartel/monopsony harmful to sellers under antitrust law)
- Major League Baseball Props., Inc. v. Salvino, Inc., 542 F.3d 290 (2d Cir. 2008) (discussion that agreements to eliminate price competition via intermediaries can be price‑fixing)