The District Court Decision in O'Bannon v. National Collegiate Athletic Association: A Small Step Forward for College Athlete Rights, and a Gateway for Far Grander Change
46 Pages Posted: 3 Sep 2014 Last revised: 18 Dec 2014
Date Written: Fall 2014
On August 8, 2014, the U.S. District Court for the Northern District of California held in O’Bannon v. National Collegiate Athletic Association that the NCAA rules that prevent men’s college basketball and football players from controlling the commercial rights to their names and likenesses “unreasonably restrain trade in the market for certain educational and athletic opportunities offered by NCAA Division I schools.” The court then issued an injunction preventing the NCAA from restraining its members from compensating their men’s basketball and football players up to $5,000 per year for the use of their likenesses. The court further enjoined the NCAA from prohibiting monetary awards to college athletes in the amounts up to “the full cost of attending the respective NCAA member school.” The O’Bannon decision is an important step forward for both college athletes’ rights and sports law jurisprudence because it recognizes that NCAA rules limiting student-athlete pay may violate Section 1 of the Sherman Antitrust Act. Nevertheless, the ruling’s impact is tempered by the iconoclastic nature of the court’s injunction, which limits the immediate potential for student-athlete compensation beyond a nominal amount. At the same time, the ruling seems to ignore the broader implications of NCAA restraints on third-party markets for licensing celebrities’ likenesses for endorsements – restraints that courts eventually must overturn.
This essay explains why the district court decision in O’Bannon v. National Collegiate Athletic Association was correct to hold that the NCAA unreasonably restrained trade by preventing athletes from sharing revenues derived from the use of their names and likenesses, but incorrect to issue an injunction capping athlete compensation through a deferred trust amount of $5,000 per year. Part I of this article provides the procedural history of O’Bannon v. National Collegiate Athletic Association – a case that many believed would fundamentally change the nature of college athletes’ rights in America. Part II explains the findings of fact and conclusions of law in the O’Bannon bench trial, as well as discusses the court’s permanent injunction issued against the NCAA. Part III explains why the district court in O’Bannon was legally correct to find the NCAA’s restraints on sharing revenues with college athletes violated Section 1 of the Sherman Act. Part IV explains why the permanent injunction issued by the court in O’Bannon does not fully ameliorate the NCAA’s restraints. Finally, Part V discusses the logical next steps that could follow the district court’s decision in O’Bannon, including the possibility of an appeal by both parties, follow-up lawsuits seeking to further dismantle the NCAA’s amateurism rules, player unionization efforts, Title IX compliance issues, and a petition by the NCAA to Congress for a broad-based antitrust exemption to fully preserve its longstanding restraints on college athlete pay.
Keywords: NCAA, National Collegiate Athletic Association, antitrust, amateurism, O'Bannon, sports law, college athletes, college sports, Marc Edelman
JEL Classification: K20, K21, K31, K40, L12, L13, L40, L41, L43, L49, L50, L83, Z10, H52, J42, J50, J40, I20, I22, I28
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