Ed O’Bannon’s Biggest Score, NCAA Must End Athlete Exploitation

The landmark ruling opening the door for college football and basketball players to share in profits from the use of their names, images and likenesses may face years of appeals but no matter the outcome, it marks the end of NCAA control of college players’ income.

U.S. District Judge Claudia Wilken ruled Friday that the NCAA operated as an anti-competitive cartel to keep athletes locked out of a rightful share of the profits from the use of their skills.  She issued an injunction telling the NCAA it can no longer bar schools from paying athletes for names, images and likenesses (NIL).  She didn’t tell the NCAA and athletes how this can be achieved except to say the money could be put in a trust to be paid after the students graduate and that the salary cap cannot be below $5,000.

But Wilken did impose limits.  She allowed the NCAA to prevent athletes from marketing themselves, holding that was a legitimate pro-competitve rule.

Yet the NCAA has been under increasing pressure to relent on sharing its wealth with athletes.  Northwestern football players voted in April on a call to form a union, though the results have been released.

And the NCAA has been gradually changes rules to allow greater scholarship compensation for athletes and other small perks as criticism mounted about the billions of dollars it collects from contracts while shutting out the athletes.

Wilken pointed out that in 2007 the NCAA expanded its amateurism rules and increased financial aid to allow athletes who qualify to accept Pell Grants of up to $5,500 in addition to a full athletic grant-in-aid.

Trial

During the six-week, non-jury trial the lawyers for former UCLA basketball star Ed O’Bannon argued the NCAA violated antitrust law when it barred student athletes from pocketing a share of the sale of licenses to use their NIL in videogames, live TV and other footage.  He is the lead plaintiff among a group of 20 current and former student athletes who played Division I men’s basketball or football from 1956 to the present.

The NCAA denied the charge and instead asserted that its restrictions on compensation were necessary to uphold its educational mission and to protect the popularity of collegiate sports.

“The court finds that the challenged NCAA rules unreasonably restrain trade in the market for certain educational and athletic opportunities offered by NCAA Division I schools,” Wilken wrote.

But that finding is only the first half of the issue.  The NCAA rule could survive if it could prove a pro-competitive purpose for the antitrust violation.  Again the NCAA failed.

“The pro-competitive justifications that the NCAA offers do not justify this restraint and could be achieved through less restrictive means,” Wilken wrote.

She pointed out the NCAA imposes strict limits on the amount of compensation student athletes may receive from their schools and prohibits any pay based on athletics ability that exceeds a “grant-in-aid,” that covers tuition, room, board and books.

Plaintiffs Alternative Compensation

The plaintiffs raised three possible alternatives to compensate student athletes: raise the grant-in-aid stipend derived from licensing revenue, allow schools to deposit a share of revenues into a trust for student-athletes or allow student-athletes to receive limited pay from third-party endorsements approved by their schools.

She approved the first two approaches but rejected the third, allowing students to endorse commercial products would undermine the NCAA and schools’ efforts to protect athletes against exploitation.

Wilken concluded the NCAA could set a cap on the amount of compensation paid to student-athletes while enrolled in school.  However, the NCAA will not be allowed to set a cap of less than $5,000, noting it is comparable to Pell grants or the amount a tennis play may receive prior to enrolling.

She said other NCAA eligibility rules would remain in place, including prohibitions on endorsements of commercial products and academic eligibility standards.

Case: O’Bannon v. NCAA, No. C09-3329CW