Is O’Bannon v. NCAA Headed for the Supreme Court?

The month of October begins with it the heart of the college football season and ends with midnight madness and the first practices for men’s college basketball. At the cusp of this October, however, is particularly significant for the NCAA as it awaits the Supreme Court’s decision as to whether it will grant certiorari and hear O’Bannon v. NCAA. O’Bannon involves an antitrust action brought by Ed O’Bannon, a former college basketball standout for the University of California Los Angeles. Central to the case is O’Bannon’s demand for the Court to strike down the NCAA’s “amateurism provisions” that prevent college athletes from financially profiting from the use of their likenesses in commercial products and game broadcasts.

O’Bannon was successful at both the district and appellate stages of litigation, but the extent of that success is at issue in his request for review by the Supreme Court. Specifically, while both the district and appellate courts found that the NCAA’s amateurism restrictions that limit athlete compensation were subject to antitrust law scrutiny, they also determined that some cap on compensation was needed in order to preserve the NCAA’s products of bigtime college football and basketball. Prior to O’Bannon, the NCAA was permitted to restrict athlete compensation to what is provided by grant-in-aid (tuition, books, room and board). The appellate court in O’Bannon found that the NCAA’s amateurism aims could still be met by extending grant-in-aid to include the full cost of attending member institutions.

Horizontally imposed caps on compensation represent a form of price fixing like that is “ordinarily condemned” by courts as per se illegal under the antitrust laws. However, there exists an anomaly in antitrust law found in that a line of cases from multiple federal circuits that have all condoned, rather than condemned, the NCAA’s caps on athlete compensation. The reasoning for the anomaly is found in Justice Stevens’ now seminal dicta in NCAA v. Board of Regents of University of Oklahoma, a case that invalidated the NCAA’s cartel control over television broadcasts. In dicta, Justice Stevens found that the NCAA markets a collection of contests that requires cooperation on a “myriad of rules” that “define the competition to be marketed.” For Justice Stevens, the product of college football was defined not just by the constitutive rules for how contests would take place, but also by the restraints that identified the game with an “academic tradition.” Justice Stevens believed that the academic tradition of college football is what distinguished it from the NFL’s product and this distinction provided consumers with a wider choice of football options from which to choose. The widening of consumer choice provided basis for the notion that consumers benefited from the NCAA’s amateurism provisions because they were necessary for the creation college football.

Not all are convinced by the Ninth Circuit and Justice Stevens’ reasoning that consumers value amateurism. Many legal scholars and economists have lined up in support O’Bannon’s challenge to the validity of the NCAA’s amateurism justification for capping athlete compensation. They point to the fact that bigtime college football and basketball are multi-billion dollar industries that allow middle-aged men to make millions from the sweat of those who are only given enough to attend school. Most among this group are also very skeptical of the importance that courts have placed on consumer interest in college athlete compensation.

While O’Bannon may have filed with the Supreme Court first, the NCAA also would like for the Court to take the case and reverse the Ninth Circuit’s decision that the NCAA’s cap on athlete compensation violates antitrust law. A number of legal scholars and economists have aligned with the NCAA and caution the Court that judicial oversight of NCAA regulations through application of the antitrust laws will threaten the existence of college athletics. In arguing for Supreme Court review, the NCAA’s supporters also point to a perceived divide in the federal circuits on the issue of whether antitrust law applies to the NCAA’s regulation of athletes. They recognize that prior to the Ninth Circuit’s decision in O’Bannon, no federal appellate court had ever worked through all of the steps needed to determine the reasonableness of the NCAA’s amateurism provisions, much less found them to violate antitrust law.

The stakes before the Supreme Court in O’Bannon are very high, but the odds that the Court takes the case are slim. It’s rare for any matter to reach the Court for review, but the chances might be even more slight in this case based on judicial reluctance to dramatically alter the operation of NCAA athletics. Still, there exists a possibility that the Court takes the case because the controversies surrounding the NCAA’s compensation caps will not go away, even if Ed O’Bannon does. In fact, several other antitrust actions that challenge NCAA regulation of college athletes are currently pending among the federal circuits. What has become very clear is that whether in O’Bannon or some future action, the Supreme Court will eventually need to revisit Justice Stevens’ position in Board of Regents and definitively resolve the reasonableness of the NCAA’s athlete compensation caps/amateurism provisions under antitrust law. For right now, fans of college football should keep an eye out to see whether the Supreme Court agrees to hear O’Bannon. That decision will be the most important score update on the ESPN crawl.

Post by: Thomas A. Baker III, J.D., Ph.D., Ruling Sports Contributor (@DrTab3)

Thomas A. Baker III, J.D., Ph.D. is a commercial litigator turned professor of sports law at the University of Georgia. His research is mostly on the application of commercial laws to sport. Follow him on Twitter @DrTab3.

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