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NCAA Proposes Settlement To Class Action Antitrust Litigation
06/04/2024On May 23, 2024, the National Collegiate Athletic Association (“NCAA”) reached an agreement with five of the nation’s collegiate athletic conferences—the Atlantic Coast Conference, the Big Ten, the Big 12, the Pac-12, and the Southeastern Conference—to allow student athletes to receive pay directly from their colleges and universities. The agreement is intended to settle In re: College Athlete NIL Litigation, Case No. 4:20-cv-03919, N.D. Cal., an ongoing antitrust class action in the United States District Court for the Northern District of California involving hundreds of thousands of collegiate athletes.
The complaint, initially filed in 2020, alleged two violations of Section 1 of the Sherman Act. The first allegation was that the NCAA and its athletic conferences entered into a conspiracy in restraint of trade to artificially fix the amount for which class members could license and sell their name, image, and likeness (“NIL”). Plaintiffs argued that NCAA rules and regulations, which at the time prohibited Division I athletes from endorsing any commercial products or services, fixed this amount at zero. The second allegation was that defendants entered into another agreement in restraint of trade to effectuate a group boycott of and refusal to deal with those class members that did not comply with NCAA policies. Plaintiffs argued that this was so because any athlete found to have engaged in licensing or selling of NIL rights would be declared ineligible to compete.
Defendants replied with a motion to dismiss, arguing that (1) the claims were barred by stare decisis due to previous decisions in O’Bannon v. National Collegiate Athletic Association, 802 F.3d 1049 (9th Cir. 2015) (finding the NCAA’s practice of barring payments to athletes violated antitrust laws and that schools could offer full-cost of attendance scholarships that covered cost-of-living expenses) and National Collegiate Athletic Association v. Alston, 141 S. Ct. 2141 (2021) (finding the NCAA’s practice of barring payments to athletes violated antitrust laws and that athletes could receive non-cash compensation like computers and internships for academic-related purposes); (2) Plaintiffs failed to plead an injury, as they had no legal entitlement to the revenue; and (3) Plaintiffs failed to identify a relevant market, as they did not address the group licensing market from O’Bannon and instead identified the “nationwide market for the labor of NCAA Division I college athletes.”
Judge Claudia Wilken of the United States District Court for the Northern District of California rejected these arguments, holding that (1) stare decisis did not bar the litigation because they were limited in scope, involved different NCAA rules, and the NCAA had since admitted restrictions on compensation should be loosened (thereby contradicting prior representations); (2) plaintiffs did not need a legal entitlement to the revenue pleaded and could show injury by the fact that they were deprived of the opportunity to receive compensation they otherwise would have received but for the challenged conduct; and (3) plaintiffs did not need to identify the same market in O’Bannon and successfully alleged a plausible relevant market.
Though the NCAA lifted the restraints in 2021 and began allowing collegiate athletes to receive NIL compensation, the proposed settlement at hand would pay compensation to approximately 25,000 former athletes who were subject to this restriction.
Indeed, the proposed settlement would pay $2.8 billion in damages over ten years to athletes falling into three categories: (1) athletes who played major-conference football and men’s basketball; (2) athletes who played major-conference women’s basketball; and (3) any Division I athlete who competed between 2016 and 2020 and joined the class action. It would also allow Division I schools, beginning in the autumn of 2025, to set aside up to $20 million of sports revenue per year with which to compensate athletes.
Judge Wilken must still approve the proposed settlement in the coming months. Nevertheless, some have praised the proposed settlement as long-due recognition of the important role collegiate athletes play in generating revenue and creating a billion-dollar industry for colleges and universities.
Opponents have voiced concern, however, including the NCAA in its arguments that any proposed settlement would disadvantage female athletes, with the lion’s share of compensation going toward male athletes. Others argue that the proposed settlement may still allow the NCAA to restrain the compensation of collegiate athletes at a fixed rate, even if that rate is not zero, since member schools will get to determine if and how revenue is shared. And, perhaps most importantly, the NCAA itself continues to lobby Congress for an antitrust exemption, arguing that collegiate athletes are not employees but students.
As such, it seems that despite the proposed settlement, questions around the NCAA and antitrust will remain. Its attention will most immediately be drawn toward another ongoing antitrust class action. Judge Charlotte Sweeney of the United States District Court for the District of Colorado recently refused to transfer (and thereby likely consolidate with In re: College Athlete NIL Litigation) Fontenot v. National Collegiate Athletic Association, 1:23-cv-03076, D. Colo., a case with similar claims, to the Northern District of California.
