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The NCAA’s loss in the O’Bannon case and why it matters

August 9, 2014 by Scott Bomboy


On Friday night, a federal judge said the NCAA must allow compensation to student-athletes whose likenesses are used in video-based products. The landmark decision will likely be appealed, but it’s a big deal for a high-profile business of televised college sports.


Link: Read The Decision


300px-NCAA_logo.svgThe 99-page anti-trust decision from Judge Claudia Wilken of United States District Court in Oakland, Calif., wasn’t a total loss for the NCAA. However, key parts of Wilken’s decision could alter the landscape of college athletics and how they are presented to the public.


“Before the Court in this case is only whether the NCAA violates antitrust law by agreeing with its member schools to restrain their ability to compensate Division I men’s basketball and FBS football players any more than the current association rules allow. For the reasons set forth above, the Court finds that this restraint does violate antitrust law,” Wilken concluded in her ruling.


Wilken cited a range of Supreme Court anti-trust opinions in her decision, including the 1984 decision in NCAA v. Board of Regents of the University of Oklahoma. The Board of Regents decision stripped some key centralized powers from the NCAA over its college football television programming.


“Plaintiffs have also presented ample evidence here to show that the college sports industry has changed substantially in the thirty years since Board of Regents was decided,” Wilken said. “The historical record that the NCAA cites as evidence of its longstanding commitment to amateurism is unpersuasive.”


Popularly known as the O’Bannon case, the decision in O’Bannon vs. NCAA and Electronic Arts now presents an injunction against current rules that bar college athletes from earning money from the use of their names and images in video games and television broadcasts. Students in the 2016 recruiting classes would be the first to benefit from the decision, and compensation would be capped at $5,000 per year, to be put in a trust fund, for athletes who are found to be eligible.


The plaintiffs, led by former UCLA basketball player Ed O’Bannon and a team of lawyers, won a limited victory. The schools can decide how much they want to contribute to the trust funds and athletes can’t make their own product-endorsement deals.


The NCAA has long argued that its student-athletes are amateurs, and NCAA president Mark Emmert warned Wilken of an ensuing disaster if schools needed to pay the athletes compensation beyond their scholarship conditions.


Wilken didn’t agree with the argument.


“The high coaches’ salaries and rapidly increasing spending on training facilities at many schools suggest that these schools would, in fact, be able to afford to offer their student-athletes a limited share of the licensing revenue generated from their use of the student-athletes’ own names, images, and likenesses,” Wilken said.


“We disagree with the Court’s decision that NCAA rules violate antitrust laws,” NCAA Chief Legal Officer Donald Remy said in a statement. “We note that the Court’s decision sets limits on compensation, but are reviewing the full decision and will provide further comment later. As evidenced by yesterday’s Board of Directors action, the NCAA is committed to fully supporting student-athletes.”


By one estimate, the decision could cost the group of major colleges who field basketball and football teams about $300 million over a four-year period, if the schools were to contribute the maximum annual trust-fund amounts.


But in the long run, the O’Bannon decision could open up a Pandora’s Box of other court decisions about the NCAA, amateurism and paid compensation.


Two cases are in the legal pipeline about limits placed by the NCAA on compensation due to student-athletes under their scholarship conditions. One case seeks damages for the difference in the value of a scholarship and the full cost of attending college.


The second case is much broader and challenges the NCAA’s economic foundation. Attorney Jeffrey Kessler’s suit on behalf of current and former players seeks to end all bans on student-athlete compensation.


“The main objective is to strike down permanently the restrictions that prevent athletes in Division I basketball and the top tier of college football from being fairly compensated for the billions of dollars in revenues that they help generate,” Kessler told ESPN in March.


A unionization drive among football players at Northwestern is also in the works.


“It’s a huge day, and it’s a huge loss for the N.C.A.A. because they have relied on amateurism for so long,” said Michael Carrier, a Rutgers-Camden law professor told the New York Times on Friday night. “It opens the door for future challenges to all of the N.C.A.A.‘s policies.”


The NCAA is expected to appeal and there is already speculation that the O’Bannon case will wind up, in some form, at the Supreme Court as it goes through the appeals process. If so, the Court’s logic in the 1984 NCAA v. Board of Regents of the University of Oklahoma would be tested.


Scott Bomboy is editor in chief of the National Constitution Center.


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