This edition of my series on the O’Bannon v NCAA ruling will focus on the central antitrust and economic issues presented in the case. A little dry, I know, but these discussions are the key foundations of the entire litigation; their importance cannot be understated.
It is critical to understand that any successful antitrust litigation must identify a relevant market in which trade has been unfairly restricted. Without the presence of a relevant market, antitrust injury cannot be proved in a court of law. Many NCAA antitrust cases have failed due to the plaintiff’s (athlete’s) inability to pinpoint an economic market that has been unduly burdened by NCAA red tape; however, this is not the case in O’Bannon.
Lead attorney Michael Hausfeld and his legal team ensured that Judge Claudia Wilken ’71 would not summarily dismiss the action by thoroughly presenting not one, but two markets that the NCAA’s restrictions impaired: the “college education market” and the “group licensing market.” I will discuss these markets now.
In order to be classified as an economic “market,” three elements must be present: a producer/seller, a product/service and a buyer. In the “college education market,” the producers/sellers are institutions of higher education, which “compete to sell unique bundles of goods and services to elite football and basketball recruits.”
This “unique [bundle] of goods,” or product, stems from the granting of a scholarship, which covers basic university expenses, such as tuition, fees and room and board. Most importantly, however, the conferral of the scholarship and the athlete’s (the buyer’s) subsequent enrollment at the institution provide access to a wide range of economic “opportunities to compete at the highest level of college sports, often in front of large crowds and television audiences,” and non-economic (“medical treatment”) benefits. In return for these benefits, athletes offer their athletic prowess, and are forced to relinquish their right to profit from the use of their name, image or likeness (NIL).
The key takeaway here was provided by Stanford’s own Dr. Roger Noll, who testified as the plaintiff’s economic expert. As he most eloquently and correctly expressed, Division I football (FBS) and basketball schools are the only institutions that can offer the aforementioned combination of educational and athletic benefits, namely, “if the top athletes are offered a D-I scholarship, they take it. They do not go anywhere else.”
The fact that NCAA Division I institutions are the sole providers of such educational and athletic benefits — “there are no substitutes for the opportunities offered by FBS football and Division I basketball schools” — create the perfect market conditions for a monopoly, or seller’s cartel. In this case, the sellers (Division I colleges and universities) and the NCAA have essentially conspired with one another to artificially set the compensation that the athletes receive for the use of their NIL at zero.
The other relevant market that the O’Bannon team claimed was impacted by the NCAA bylaws is the “group licensing market.” In this market, one would think the roles are flipped, with the athletes acting as the sellers and the NCAA, its institutions and other “third party licensing companies” (media companies), constituting the buyers.
Remember, however, that NCAA Bylaw 220.127.116.11 expressly prohibits athletes from personally profiting from the use of their NIL; thus, the NCAA and its member institutions appropriate the athletes’ NIL rights and sell them to broadcasters (NBC, CBS, ESPN, etc.) and video game producers (EA) for their own gain. In this way, a segment of the would-be buyers — the NCAA and colleges and universities — become the sellers, seizing the athletes’ NIL rights and selling those rights themselves. You are beginning to sense more than just a twinge of unfairness and inequity, right?
So am I, and so do Ed O’Bannon and Co. They argued that sans NCAA Bylaw 18.104.22.168 and other similar restrictions, players and groups of players “would be able to create and sell group licenses for the use of their names, images and likenesses” across a multiplicity of media platforms.
Hopefully you have made it this far, and have not turned the page or clicked away — I am sure Mark Emmert and his boys in Indianapolis would love it if you did. Let’s recap: In order for any antitrust litigation to make it off the ground, the plaintiffs must identify a market in which trade has been unfairly restrained or otherwise restricted. The O’Bannon legal team did just that, presenting two markets that have suffered as the result of NCAA interference: the “college education market” and “group licensing market.”
Next week, I will detail the “challenged restraints” and give a real-life example of how NCAA restrictions can have negative impacts on athletes’ economic pursuits.
Cameron Miller is begging for you to read his whole column and give him the viral attention that he deserves in his 20th consecutive attack on Mark Emmert and the NCAA. To assure Cameron that this NCAA column will finally be the charm, email him at cmiller6 ‘at’ stanford.edu.