The O’Bannon Decision: How Did Judge Wilken Reach Her Conclusion?

Late Friday, Judge Claudia Wilken issued her much anticipated decision in the O’Bannon v. NCAA case.  In the 99 page ruling, she declared the NCAA’s rules prohibiting compensation to student-athletes for their names, images and likenesses (NILs) to be in violation of federal antitrust law.  Judge Wilken therefore enjoined the NCAA from enforcing any rules which: 1) prohibit schools or conferences from awarding limited portions of NIL revenue to student-athletes above full grant-in-aid, and 2) prohibit schools or conferences from depositing limited portions of NIL revenue in a trust account, to be accessed by the student-athlete after they depart the school or exhaust their eligibility.  The NCAA is permitted to cap the amount received while in school, provided it is not less than full cost-of-attendance.  It may also cap the amount set aside in trust, but not at an amount less than $5,000 (in 2014 dollars) for each year a student-athletes is eligible.

So how did she get there?  Let’s walk through her analysis step by step.

Something to keep in mind is that this was a “bench trial,” meaning there was no jury and that the judge is the finder of fact.  Judge Wilken’s decision is therefore broken down into two separate parts: weighing the evidence to determine the facts of the case, and then a legal analysis applying the law to those facts.  We’ll use the latter section here, which will reveal her fact finding along the way and make for a more succinct analysis.

As plaintiffs, O’Bannon had to demonstrate that 1) there was a contract/agreement where 2) the NCAA’s rules unreasonably restrained trade which 3) impacted interstate commerce.  There was no disagreement between the parties that (1) and (3) were met; the only question was (2) whether the NCAA’s rules unreasonably restrained trade.

It’s best to think of the analysis in terms of a ping-pong or tennis match. The plaintiffs bore the first burden, by showing the NCAA rules had anticompetitive effects in a relevant market.  They needed to hit the ball over the net just to get the game going.

Is There A Market?

Judge Wilken says yes, there are markets: a) a college education market (i.e. schools compete to recruit student-athletes) and b) a group license market where television networks and video game developers compete for the rights to student-athletes NILs to be used in (submarkets) live television broadcasts, video games and archive footage.  Each market was challenged by the NCAA as non-existent or wrongly defined, arguments Judge Wilken did not find persuasive.

The NCAA tried to argue, to no avail, that there were comparable alternatives to playing Division I football/men’s basketball, such as international competition and minor leagues.  According to the NCAA, it competed with these and other opportunities for student-athletes, and it’s this broader market which should be evaluated.  Judge Wilken disagreed and said these were not comparable opportunities in the same market, and therefore Division I football/men’s basketball was its own distinct market.

Regarding the markets for student-athletes’ NILs in live television broadcasts, video games and archive footage, Judge Wilken said yes, those markets exist.  Television networks, video game and media companies each make sure they have the NIL rights in any rights agreement they sign.  So at this point we have markets within which to look for anticompetitive effects.

Anticompetitive Effects?

Once we know there are markets, the next step is to look for whether the NCAA rules at issue had any anticompetitive effects within those markets.

Regarding the college education market, Judge Wilken ruled that by acting in concert to charge student-athletes the same price for their education (their athletic services along with their NILs), the NCAA’s rules have an anticompetitive effect.  Remember our tennis analogy?  It’s at this point the plaintiffs have got their first ball over the net.

It didn’t all go right for the plaintiffs at this stage, however, as Judge Wilken ruled there was not an anticompetitive effect with respect to the group license market.  Her reasoning is that the television networks currently compete for the NILs with the rules in place, albeit acquiring them from the schools, conferences and NCAA rather than the student-athletes.  The law says the injury must go beyond that of the claimant, and reach the “field of commerce.”  Judge Wilken says it doesn’t do so in the case of the group licensing markets.  (Note that she isn’t saying the student-athletes are not wrongly being deprived of their NIL rights by the defendants; rather any deprivation that may exist isn’t a violation of antitrust law.)

NCAA Must Show Procompetitive Justifications

Now that we have a restraint of trade in a relevant market (college education market), the burden shifts to the NCAA to show the restraint has procompetitive justifications (it’s their turn to hit the tennis ball back to the plaintiffs).  These are the arguments you’re probably aware of: 1) amateurism, 2) competitive balance, 2) integration of academics and athletics and 4) the ability to generate greater output (i.e. more games, teams, etc.).

Regarding amateurism, Judge Wilken was tough on the NCAA for much of her decision.  She points out the NCAA’s definition of amateurism has changed numerous times over the years, and is essentially whatever the NCAA determines is in its best interest at that time (e.g. once upon a time athletic scholarships were not permitted due to amateurism principles).  Moreover, the definition can be different depending on the sport you play (e.g. tennis players can receive limited prize money while other student-athletes cannot).  However, she concludes by conceding that there may be some limited procompetitive purpose for restricting the amount of money student-athletes are compensated, in order to maintain the sports’ popularity as an amateur endeavor.

Judge Wilken does not buy the NCAA’s procompetitive argument related to competitive balance.  She points out the current rules have not generated balance, and to take them away would not substantially tilt the scales in favor of the “haves” any more than they already are.

Similar to the amateurism argument, Judge Wilken found that the NCAA’s rules may have a limited procompetitive purpose for assisting with academic and athletic integration.  This purpose has been recognized as valid in prior cases, and by preventing large sums of money flowing to student-athletes, the rules could be said to prevent barriers between them and the rest of campus.

Judge Wilken does not agree with the NCAA that the rules increase output (schools, games, etc.).  She was not persuaded that schools are committed to these rules such that, if the rules were removed, the schools would cease to participate in Division I football and men’s basketball.  In fact, the new autonomy push by the large conferences to be able to alter rules to provide more assistance (financial and otherwise) to student-athletes actually was evidence against the NCAA on this point.

All that said, the NCAA was able to demonstrate some limited procompetitive justifications for its rules (via amateurism and the integration of academics and athletics), and (barely) got the ball back over the net.

Was There A Less Restrictive Alternative?

So, we have restraint of trade in the college education market and now also have some limited procompetitive reasons related to amateurism and the integration of academic and athletics that Judge Wilken has recognized.  The burden now shifts back to the plaintiffs to show whether a less restrictive alternative is available to accomplish the NCAA’s goals.

The plaintiffs suggested three remedies: 1) student-athletes could receive a stipend to cover up to the full cost-of-attendance, 2) place some portion of NIL funds in trust for student-athletes to receive after graduation, and/or 3) allow student-athletes to endorse commercial products.  Judge Wilken agreed with the plaintiffs as to (1) and (2), but not to (3).  Therefore the plaintiffs, by demonstrating less restrictive alternatives exist that would allow the NCAA to achieve the goals, prevail in the case and are entitled to remedies.  So to conclude our tennis analogy, convincing Judge Wilken of a less restrictive alternative is hitting the case winner down the line.

So there you have it, 99 pages from Judge Wilken condensed to three.  I hope this is helpful, especially for those of you interested in the legal rationale but not so interested as to read all 99 pages!  I look forward to another installment with an appeals court decision in this case, of perhaps another of Judge Wilken’s decisions in one of the other NCAA cases in her court.  Stay tuned!

2 Comments

  1. Bobby says:

    As someone who falls into the category of “interested in the legal rationale but not so interested as to read all 99 pages,” this was great! Thanks.

    • Daniel Hare says:

      Thanks! Oh and I left out an entire discussion on a monopsony theory the plaintiffs offered as an alternative to the monopoly theory regarding the college education market. That theory says the recruits are sellers of their athletic services and the schools are buyers of the same. So essentially it is a buyers cartel (monopsony) as opposed to a sellers one (monopoly). The judge said either was valid.

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