For the NCAA, times are changing. A federal judge issued a 99 page ruling Friday in the O’Bannon v. NCAA case. At issue was whether or not the NCAA could restrain student athletes from being compensated for the use of their likeness in video games, advertising, and other media. (Think television revenue.) The arguments from the players are that the NCAA is a monopoly and as a result violates federal antitrust laws. Essentially, the players won this argument hands down.
Likewise, from the NCAA’s perspective, any perceived antitrust benefits were outweighed by a number of factors. First, the tried and true amateurism argument came to the plate. The NCAA has argued to anyone who will listen that the popularity of the athletic programs is somehow inextricably woven to the fabric of amateurism. The Court disagreed. By pointing out that the NCAA has altered or amended its by-laws pertaining to amateurism on numerous occasions. The NCAA also pointed to a survey which indicated fans would be less likely to watch or follow NCAA athletics if the student athletes were paid. For various reasons, including inconsistent answers by respondents, the Court was unmoved by these survey findings. Because of the changes in the by-laws and inconsistencies over time, the Court was not persuaded that amateurism was a valid reason to forego the antitrust restrictions.
Next, the NCAA argued that payment to players would somehow alter or effect the competitive balance amongst the haves and the have nots of the NCAA. The Court again was not persuaded. By pointing out that the major D-1 schools spend more money on coaches, facilities, and recruiting, the Court acknowledged that there is already an imbalance amongst the large schools and the small schools and that player compensation would not alter this in any way. Because of the imbalance which is known and unregulated, the Court determined that the NCAA is not concerned with “competitive balance” amongst its member institutions.
The NCAA followed that losing argument with another. This time they argued that the integration of academics and athletics was a reasonably compelling reason to limit the compensation of student athletes. The NCAA offered testimony that student athletes receive a far greater value because of their status as athletes. The NCAA said that paying players would drive a wedge between current non-athlete university students and players and that because of these types of considerations, the NCAA rules prohibiting compensation should be viewed as reasonable. The Court was not persuaded.
The last argument the NCAA attempted was that by not paying student athletes, the member institutions could participate in more games and that payment would likely lead to fewer institutions being involved in Division 1 basketball or FBS football. This argument is weak for the sports fan, and it was roundly rejected by the Federal Court as well. Clearly, the institutions are doing just fine economically speaking. Nothing the NCAA argued about payment to players changed the Court’s opinion.
The Court’s Solution
The Court ruled that there could be an increase in the financial aid which would cover the full cost of attendance. This covers educational expenses and is therefore consistent with the NCAA policies and rules. Next, the Court ruled that the players could receive compensation from a trust fund which would be established from the proceeds of licensing agreements. This amount is capped at $5,000 per athlete and is for every member of the football and basketball teams. This ruling does not speak to Title IX or any of the other “non-revernue” sports. It also does not differentiate between starters and non-starters. Lastly, the Court rejected the student athlete’s request to be compensated for third-party endorsement contracts.
Long Term Effect
The long term effect of the Court’s ruling is yet to be determined. Surely appeals will flow from both sides. The NCAA cannot simply agree that they are in violation of antitrust law, and players will not likely accept the limitations on compensation imposed by the Court. The fallout for other sports will likely be forthcoming as well. With these challenges still remaining, and the appeals still forthcoming, it is safe to say that this is but the first of many chapters in this litigation.
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