In case you missed it: NCAA faces growing antitrust challenges over NIL rules

Originally published by Yellowhammer News.

In ‘Case’ You Missed This is a Yellowhammer News column written by attorney Tripp DeMoss of Balch & Bingham that briefly summarizes recent rulings from higher courts, such as the United States Supreme Court and the Alabama Supreme Court, on issues of interest to Alabamians , which they might not otherwise have heard about.

The college football season is in full swing, which provides an excellent opportunity to check the status of various antitrust cases related to the National Collegiate Athletic Association’s (“NCAA”) rules governing the use of name, image and likeness (“NIL”) by college athletes.

In summary, over the past several months, both state attorneys general and private student-athlete plaintiffs have been able to successfully use federal antitrust law to progressively limit the NCAA’s authority over member institutions and student-athletes in connection with the enforcement of amateurism rules in college sports, particularly when it comes to student-athletes’ use of NIL. The results of the ongoing NIL cases will gradually become clearer during and after the current football season, but the trend of antitrust lawsuits against the NCAA may continue even after the current lawsuits are concluded.

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 the Tennessee and Virginia attorneys general’s request for a preliminary injunction related to the NCAA’s NIL recruiting rule. Specifically, the lawsuit seeks to strike down the NCAA’s NIL rule prohibiting NIL affiliates and collectives from offering NIL offers to recruits as an inducement to commit to a particular school.

The intent of the NCAA’s rules banning recruiting based on NIL has often been referred to as a “pay-to-play” ban intended to preserve amateurism in college athletics. Tennessee and Virginia argue that the NCAA’s NIL recruiting rule violates the Sherman Antitrust Act. Under the Sherman Act, “every contract, trust or other arrangement, or conspiracy to restrain trade or commerce among the several states… shall be made illegal.” 15 USC § 1.

In his order, Judge Corker found, under relevant provisions of the Sherman Act, that the NCAA’s NIL recruiting ban had a material anticompetitive effect on the ability of NCAA member institutions to compete for the recruitment of student-athletes and that the NCAA’s justification for the ban: i.e., “ “special feature” of the NCAA as an organization favoring amateur competition was insufficient to justify a ban on NIL recruitment. Accordingly, Judge Corker tentatively found that the NIL recruiting ban violated the Sherman Act and ordered the NCAA to enforce the ban.

The order was issued on February 23, 2024 and applies to the NCAA nationwide. Interestingly, an amended complaint was filed in this case on May 1, 2024, with the states of Florida, New York, and the District of Columbia joining Tennessee and Virginia to challenge the NCAA’s no-NIL recruiting policy. Under the court’s latest severance order, the NCAA has until September 30, 2024 to file a response to the latest amended complaint.

Meanwhile, several other lawsuits alleging NCAA antitrust violations related to NIL are currently pending in the U.S. District Court for the Northern District of California: House et al., v. NCAA, Carter v. NCAA, AND Hubbard v. NCAA. These lawsuits reached an in-principle global settlement last 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 the proposed settlement of almost 2.8 billion dollars, which would primarily include payments to student-athletes.

Among other things, Judge Wilken expressed concerns about the terms of the House of Representatives’ settlement against the NCAA regarding third-party NIL restrictions, i.e. related to “legal highs” and NIL collectives. A “supporter” is a “representative of the athletic interests of an institution,” including any person who promotes or assists a school’s athletic department financially or provides benefits to a student-athlete, and Judge Wilken noted the confusion as to who or what constitutes “support ” can be problematic. Judge Wilken asked for changes to the settlement before the next hearing in the case, currently scheduled for September 26, 2024.

Additionally, in Fontenot v. NCAA, an antitrust lawsuit brought by student-athletes against the NCAA and the major conferences pending in the U.S. District Court for the District of Colorado, this case may or may not be affected by the global settlement in the California litigation. The amended complaint was filed in Fontenot on July 23, 2024, but pursuant to the Colorado court’s August 29, 2024 order, NCAA and athletic conference defendants will be able to respond to this latest complaint seven days after the California federal court issues its final judgment . order on “global” NIL settlement.

Recently, on September 10, 2024, another NIL/antitrust class action lawsuit was filed in the United States District Court for the Eastern District of Michigan, located in Detroit. Denard Robinson et al. v. NCAA et al., the plaintiffs, four former University of Michigan football players, sued the NCAA and the Big Ten Network over the defendants’ alleged unreasonable restraint of trade under the Sherman Act.

In short, the plaintiffs seek monetary damages from the NCAA and the Big Ten Network for loss of market value and understated wages due to the former athletes’ inability to use their NIL while playing at Michigan.

Finally, it’s worth noting that this is somewhat related Ohio State, et al., v. NCAA case in the United States District Court for the Northern District of West Virginia, on May 30, 2024, Ohio, Colorado, Illinois, Minnesota, Mississippi, New York, North Carolina, Tennessee, West Virginia, Commonwealth of Virginia, and the District of Columbia, United States Department of Justice States and the NCAA have formally resolved an antitrust case brought by the states and the Department of Justice that challenged the NCAA’s transfer eligibility rule.

The rule required student-athletes to wait a year after transferring to a new institution before they could resume competing at their new school, but the settlement stipulates that the NCAA must stop enforcing the rule.

In short, student-athlete antitrust litigation may continue (though likely somewhat limited in scope) in Colorado and Michigan, and perhaps elsewhere, against the NCAA, even after the multi-billion dollar lawsuits in California are resolved.

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