In Case You Missed It: NCAA Faces Growing Antitrust Challenges Over NILRules Rules

Originally Posted By Yellowhammer News.

In “Case” You Missed It is a Yellowhammer News column written by Balch & Bingham attorney Tripp DeMoss that briefly summarizes recent rulings by higher courts, such as the U.S. Supreme Court and the Alabama Supreme Court, on matters of interest to Alabama residents that they might not otherwise hear about.

The college football season is in full swing, which provides a perfect opportunity to review the status of various antitrust matters related to the National Collegiate Athletic Association (“NCAA”) rules governing name, image and likeness (“NIL”) use by college athletes.

In summary, over the past several months, both state attorneys general and private student-athletes have been able to effectively implement federal antitrust law to systematically undermine the NCAA’s authority over member institutions and student-athletes to enforce the rules governing amateurism in college sports, particularly with respect to student-athletes’ use of NIL. The outcomes of the pending NIL cases will gradually be resolved during and after the current college football season, but the trend of antitrust litigation against the NCAA may continue even after the current lawsuits are resolved.

You may have heard that in February, U.S. District Judge Clifton Corker of the U.S. District Court for the Eastern District of Tennessee issued an order granting a motion for a preliminary injunction filed by the attorneys general of Tennessee and Virginia against the NCAA’s NIL recruiting rule. The lawsuit seeks to end the NCAA’s NIL rule, which prohibits NIL boosters and collectives from offering recruits NIL contracts as an incentive to commit to a particular school.

The NCAA’s rule against NIL-based recruiting is often referred to as a “pay-for-play” ban intended to preserve amateurism in college sports. Tennessee and Virginia argue that the NCAA’s NIL recruiting rule violates the Sherman Antitrust Act. Under the Sherman Act, “any agreement, connection in the form of trust or otherwise, or conspiracy, for the purpose of restraining trade or commerce among the several States… is declared illegal.” 15 U.S.C. § 1.

In his order, Judge Corker found that, under the relevant provisions of the Sherman Act, the NCAA’s ban on NIL recruitment had a substantial anticompetitive effect on NCAA member institutions that could compete for student-athlete recruits, and that the NCAA’s justification for the ban, i.e., the NCAA’s “special characteristic” as an organization promoting amateur competition, was insufficient to justify the ban on NIL recruitment. Therefore, Judge Corker made a preliminary finding that the NIL recruitment ban violated the Sherman Act and ordered the NCAA to refrain from enforcing the ban.

The order was issued on February 23, 2024, and applies to the NCAA nationwide. Interestingly, an amended complaint was filed in the case on May 1, 2024, with Florida, New York, and the District of Columbia joining Tennessee and Virginia to challenge the NCAA’s NIL recruiting ban rules. According to the court’s latest information order, the NCAA has until September 30, 2024, to file a response to the latest amended complaint.

Meanwhile, litigation is currently pending in the United States District Court for the Northern District of California alleging antitrust violations by the NCAA in connection with the NIL case: House and Others Against NCAA, Carter v NCAA, AND Hubbard vs NCAAThose lawsuits reached a global settlement in principle this summer, but at a recent fairness hearing on September 5, 2024, the presiding judge, U.S. District Judge Claudia Wilken, somewhat surprisingly declined to approve a proposed settlement of nearly $2.8 billion that would have been paid primarily to student-athletes.

Among other things, Judge Wilken raised concerns about the terms of the House v. NCAA settlement agreement regarding third-party NIL restrictions, i.e., those related to “boosters” and NIL collectives. A “booster” is a “representative of the athletic interests of an institution,” including anyone who promotes or financially supports a school’s athletic department or provides benefits to a student-athlete, and Judge Wilken indicated that the ambiguity as to who or what constitutes a “booster” could be problematic. Judge Wilken requested changes to the settlement agreement prior to the next hearing in this case, currently scheduled for September 26, 2024.

In addition, in Fontenot v. NCAA, an antitrust lawsuit filed by student-athletes against the NCAA and major conferences pending in the United States District Court for the District of Colorado, the case may or may not be affected by the global settlement of the California litigation. An amended complaint was filed in Fontenot on July 23, 2024, but pursuant to an August 29, 2024 order by the Colorado court, the NCAA and conference defendants will have seven days to respond to this latest complaint after a California federal court issues a final order on the “global” NIL settlement.

Another NIL/antitrust class action lawsuit was recently filed in the U.S. District Court for the Eastern District of Michigan, Detroit, on September 10, 2024. Denard Robinson et al v. NCAA et al., the plaintiffs are four former University of Michigan football teams who sued the NCAA and Big Ten Network for allegedly unfairly restraining trade under the Sherman Act.

In brief, plaintiffs are seeking monetary damages from the NCAA and Big Ten Network for loss of market value and understated profits due to the inability of former athletes to use their NIL while playing for Michigan.

Finally, it is worth noting, in a somewhat related way, Ohio State, Others Vs NCAA In the United States District Court for the Northern District of West Virginia, on May 30, 2024, the states of Ohio, Colorado, Illinois, Minnesota, Mississippi, New York, North Carolina, Tennessee, West Virginia, the Commonwealth of Virginia, and the District of Columbia, the United States Department of Justice, and the NCAA have officially settled the antitrust case brought by those states and the Department of Justice challenging the NCAA’s transfer eligibility rules.

The rule requires student-athletes to wait a year after transferring to a new college before they can resume competing at their new school. However, the settlement states that the NCAA must stop enforcing that rule.

In short, antitrust litigation by student-athletes could continue (albeit likely in a somewhat limited scope) in Colorado and Michigan, and potentially elsewhere, against the NCAA even after the multibillion-dollar lawsuits in California are resolved.

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